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09 September 2015

Budget changes target property market

In his July budget, Chancellor George Osborne announced changes for landlords and home owners alike. Mike Wragg, an associate in the residential property team, looks at the likely impact of two of them:

The buy-to-let market

From April 2017, tax relief on mortgage interest payments on residential property will be restricted to the basic rate of 20% tax. This will be phased in over four years and, because it will limit one of landlords’ tax-deductible costs, it means they will make less profit margin from their rental properties.

Given that many people rent because they simply can’t afford to get onto the property ladder, our concern is that private landlords will simply put up rental costs to make up the difference on the money they will lose.

We already know that property and rental prices in Buckinghamshire are among the highest outside the capital and there’s no doubt that the number of investors in the buy-to-let market has increased.

In particular, some of these are using monies newly-released from their pension pots to buy property and secure a future income. Without the need to secure mortgage approval, their ability to move quickly on purchases means they are further squeezing the market and making it harder than ever for first time buyers to find suitable properties in the area.

New IHT rules

Another major change from the Chancellor was the announcement that families will potentially be able to leave property worth up to £1 million to their children and direct descendants without an inheritance tax charge.

It means the introduction of a family home allowance of £175,000 will be added to the existing £325,000 inheritance tax threshold, bringing the total transferable tax-free allowance from both parents in a married couple or civil partnership to £1m.

The new structure will be introduced in stages, beginning with a family home allowance of £100,000 in April 2017 and reaching £175,000 by April 2020.

This is good news for home owners in the £1m price bracket as it means they will now be able to pass on their primary residence to children or grandchildren without fear of having to pay inheritance tax.

For those with more expensive properties however, it’s less good news as the tax relief tapers off as the value of a person’s estate increases and gradually the allowance will be taken away from those with estates worth more than £2 million.

Measures are also due to be announced to help families to downsize, potentially releasing larger properties onto the market, while still protecting some of their investment for future generations. A consultation on these proposals is due to be published later this year.

To speak with Mike or a member of the residential property team about your property matters, call 01753 279021 or email

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Phone: +44 (0) 1753 889995


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