The recent budget has been described as one of the most progressive for years and one of the headline grabbing changes relates to the passing on of family homes and inheritance tax. From April 2017 if you own a property worth up to £1m you will be able to leave it to children or grandchildren completely free of inheritance tax. The following is taken from the Daily Telegraph’s report on the existing rules and how the new proposals will work.
In his budget speech on the 8th July 2015, Chancellor George Osborne announced that he will raise the inheritance tax (IHT) threshold from £325,000 per person to £500,000. This means that married couples and civil partners will be able to pass on assets worth up to £1m, including a family home, without paying any IHT at all.
Thousands of home owners have seen the value of their properties soar in recent years, particularly in London and the south east, thanks to a buoyant property market. This has raised concerns for many about the amount of tax their estate will incur after their death.
What are the rules now?
IHT is currently levied at a rate of 40pc on the value of an estate above the tax-free threshold, which has been frozen at £325,000 per person since 2009. Married couples and civil partners are entitled to double the allowance, passing on assets to their children or other relations worth up to £650,000 before a tax charge is triggered.
How will this change?
The Government will add a “family home allowance” worth £175,000 per person to the existing £325,000 tax free allowance from April 6, 2017. This means that individuals can pass on assets worth up to £500,000, including a home, without paying any IHT at all. For married couples and civil partners, the total is £1m. This additional allowance will be gradually withdrawn for estates worth more than £2m. The Conservatives first mooted its plan to raise the IHT threshold in 2007 and it was included in its 2010 manifesto. However the Liberal Democrats quashed any changed to IHT during the Coalition government.
What if I downsize my home?
Anyone who wants to downsize to a smaller property will be eligible for an “inheritance tax credit” so that even if they sell an expensive property they will still qualify for the new threshold providing the bulk of the estate is left to direct descendants. This is an attempt to encourage pensioners to free up larger properties for growing families.
How much will I pay?
Hargreaves Lansdown has calculated how these changes will affect you, depending on the size of your assets.
Single person
| Value of family home | Value of other assets | Value of the estate | IHT liability now | IHT liability from April 2017 |
| £175,000 | £175,000 | £325,000 | Nil | Nil |
| £200,000 | £300,000 | £500,000 | £70,000 | Nil |
| £250,000 | £400,000 | £650,000 | £130,000 | £60,000 |
| £400,000 | £600,000 | £1,000,000 | £270,000 | £200,000 |
| £750,000 | £750,000 | £1,500,000 | £470,000 | £400,000 |
| £1,000,000 | £1,000,000 | £2,000,000 | £670,000 | £600,000 |
Married couple
| Value of family home | Value of other assets | Value of the estate | IHT liability now | IHT liability from April 2017 |
| £175,000 | £175,000 | £325,000 | Nil | Nil |
| £200,000 | £300,000 | £500,000 | Nil | Nil |
| £250,000 | £400,000 | £650,000 | Nil | Nil |
| £400,000 | £600,000 | £1,000,000 | £140,000 | Nil |
| £750,000 | £750,000 | £1,500,000 | £340,000 | £200,000 |
| £1,000,000 | £1,000,000 | £2,000,000 | £540,000 | £400,000 |
To misquote Albert Arkwright in Open All Hours, so far it’s been a funny old year. Speaking to property buyers, sellers and agents up and down the country, broadly speaking, most seem to share our experience of the housing market over the course of the first half of 2015 in that it’s been something of a mixed bag.
We at Rural View were busy with viewing appointments right from the start of the year, even back in January and February when the housing market is usually in a state of hibernation. The spring and early summer months saw our diaries particularly full with appointments although lately this has been a little more erratic with some days being fairly quiet whilst with others it has been a job to fit in all the viewing requests.
However, rather than viewing numbers, what is more relevant to the agent and their vendor clients is whether they generate offers and subsequently; sales. Depending on prevailing market conditions, the desirability of the individual property and its pricing policy, one would normally expect around 8-10 viewings to generate an offer. This statistic certainly did not apply in the early part of the year and up until May as despite all the viewing activity, buyers appeared reluctant to commit to making purchases. Since then it has been a different story and the last two months has seen a marked increase in the number of offers being made and accepted.
It is perhaps a little too easy to explain the pattern of house buyer behaviour so far in 2015 as being down to the political uncertainty in the lead up to the general election and it’s outcome as there was plenty going on prior to the 7th May. It does appear however, that the election did play its part in influencing prospective purchasers’ decision making but there are other factors as well. These include simply the time of year with the late spring/early summer period traditionally being one of the most active periods, a hint of an easing of the stringent mortgage lending restrictions and the general vagary of the ebb and flow of market activity which defies logic and analysis.
The other side of the demand for property coin is of course supply. Other than a number of homes that had been ‘rested’ over the winter becoming available again, there was the usual slow start to the year for new properties being put up for sale followed by a flurry of new instructions in April and May. June in contrast has seen a shortage of homes coming to the market even though there are a good number of motivated buyers actively house hunting.
Normally a favourite newspaper and dinner party topic, there has been little to talk about regarding house prices so far this year mainly because they have remained pretty stable.
So what of the remaining six months of 2015? All I can say is that the housing market will continue to be predictably unpredictable and that sellers of sensibly priced and proactively marketed homes in the best locations will, as ever, be sure of attracting good interest.
As 2015 gets underway, we look to the year ahead and wonder what it has in store for us. At the moment there is a good deal of uncertainty as to how the housing sector will perform this year. The collapse of oil prices, free falling values of some of the World’s major currencies and a weak Eurozone has led to a fragile global economy and coupled with the prospect of a close general election, the outlook is one of caution.
Despite improved trading conditions in 2014 and the recent welcome overhaul of the stamp duty system, many commentators are forecasting UK house prices to remain virtually static in 2015 and for the London market not to be quite as buoyant as it has been in recent years. However prospects for the country sector appear to be more upbeat with the expectation that rural towns and villages, particularly in Southern England, will continue to perform well.
As is ever the case, attractive rural and village cottages and houses for sale or let in the areas covered by Rural View including South Wiltshire, North Dorset, South Somerset and West Hampshire are sure to remain in strong demand particularly those in the most desirable locations.
For some years now the vast majority of home buyers have house hunted almost exclusively on-line. The days of relying just on advertisements in the local press or popping into the estate agent on the High Street have all but gone and in this digital age the mouse is king!
Bearing in mind the number of property transactions throughout the UK during the course of a year (roughly one million in 2013), it is perhaps surprising that there are so few property related portals with just three major websites; Rightmove, Zoopla and Primelocation. Rightmove is certainly the most dominant and is the 8th most viewed website in the UK. I used to refer to them as the Tesco’s of the internet but even Tesco’s at their height never had such a large share of the market.
Up until now the Zoopla Property Group has been the only serious competition for Rightmove and their heavy investment in highly visible marketing campaigns has meant that they remain a key player and attract large numbers of prospective buyers to their two sites; Zoopla and Primelocation.
Rightmove, being all too aware of their importance to estate agents and indeed, an agent not on their site might as well shut up shop, has for many years got away with commanding huge fees from their agent customers. The irritation that this has caused hundreds of estate agency firms up and down the country, large and small, has resulted in the formation of Agents Mutual and the launch on the 26th January of a new estate agents’ owned website called ‘On the Market’.
To ensure their commitment to the cause, to be able to advertise their clients’ homes on ‘On the Market’, Agents Mutual members are obliged to use only one other portal which means they have to drop either Rightmove or Zoopla/Primelocation. This is something that we at Rural View are uncomfortable with as we feel that this is restrictive and contradicts our duty to promote our vendor clients’ properties to as wide an audience as possible.
We certainly welcome the challenge to Rightmove but it is unlikely that many firms will have the nerve to ditch them and instead ZPG, whose two sites are popular and fees reasonable, will be the innocent if unintended victim leaving Rightmove as strong as they were before thereby defeating the raison d’etre of ‘On the Market’. We will be keeping a close eye on the new portal and will, as ever, act accordingly in the best interests of our clients.
As has been widely reported, the headline news in yesterday’s autumn statement from the Chancellor of the Exchequer was the much needed overhaul of the way Stamp Duty is calculated. The new system is much fairer and the vast majority (reputedly 98%) of buyers will now pay significantly less tax on residential property purchases that complete from today, 4th December and onwards.
Previously a buyer paid duty on the whole purchase price of the property, the rate being determined by which price band the house fell into. This was something that impacted on the saleability of homes whose true value fell just into the threshold of a higher band, for example the duty payable for a house that sold for £500,000 was £15,000 and for one that sold for £500,001, it was £20,000, the additional £1 costing a buyer an extra £5,000 in tax.
Under the new rules, the amount of duty is based on incremental bands. New rates have been set but a buyer only pays tax on the portion of the sale price that falls within each band. It has also resulted in the first £125,000 of any house purchase being free of any liability. The new bands and rates are set out below:
Purchase Price of Property New Rates
£0 – 125,000 0%
£125,001 – 250,000 2%
£250,001 – 925,000 5%
£925,001 – 1,500,000 10%
£1,500,001 and over 12%
Note that tax is paid on the part of the property price within each tax band
Notes from HM Treasury explaining the reforms in more detail can found on the link: Stamp duty – factsheet . There is also a link to an on-line calculator: http://www.hmrc.gov.uk/tools/sdlt/land-and-property.htm
We completed on the sale of a client’s property this morning. Originally the completion date had been set for yesterday but by happy chance the seller and purchaser agreed a few days ago to change it to today, a lucky break for the buyer as she ended up saving £3,000!
There has been considerable speculation in the media since yesterday’s announcement as to what effect these changes will have on the housing sector with predictions that they may lead to fresh stimulation of market activity and a rise in property prices. It remains to be seen what will happen in reality and whilst lowering the cost of house buying is clearly good news for the industry, those of a more cautious disposition may argue that the positive impact will be negated by concerns about next year’s general election, the wider economy and possible interest rate rises.
If you have any views on these changes or would like further information, please get in touch, it would good to hear from you!
