Clarkslegal LLP - Solicitors in Reading and London

Legal Updates

Major changes ahead for those facing inheritance tax and property investors

07 October 2016 #Private Client

The Finance Act 2016 received royal assent on 15 September 2016, bringing with it a number of significant changes.  Our private client department focuses on some of the key changes tax changes clients need to be aware of. 

Inheritance tax:

The Act increases the inheritance tax allowance available to those leaving their residence children or other lineal descendants if they die after April 2017 by introducing a residence nil rate band.

Provided the main residence is left to direct lineal descendants then from April 2017, an additional £100,000 will potentially be available to those leaving their main residence to their children or remoter descendants.  This is in addition to the current nil rate band of £325,000.  Married couples and civil partners can combine all their allowances so as to give them a potential £850,000 total nil rate band from 2017, increasing to £1 million by 2020.  Those with estates in excess of £2m will however see this taper.

Given the significant changes being introduced, it is worthwhile reviewing your Wills now to ensure that they are drafted so as to take full advantage of the additional allowances now available.

Buy to lets:

From April 2017, measures are being introduced gradually.  Landlords will no longer be able to deduct all their finance costs from their property income and will instead be restricted to a basic rate deduction from their tax liability for finance costs.  Finance costs include mortgage interest (but not capital repayments)

This will be phased in as follows:

  • in 2017 to 2018 the deduction from property income (as is currently allowed) will be restricted to 75% of finance costs, with the remaining 25% being available as a basic rate tax reduction
  • in 2018 to 2019, 50% finance costs deduction and 50% given as a basic rate tax reduction
  • in 2019 to 2020, 25% finance costs deduction and 75% given as a basic rate tax reduction
  • from 2020 to 2021 all financing costs incurred by a landlord will be given as a basic rate tax reduction

For further information on the changes to interitance tax and it's implications on property investors, please feel free to contact our Private Client team. 

Clarkslegal, specialist Private Client lawyers in London, Reading and throughout the Thames Valley.
For further information about this or any other Private Client matter please contact Clarkslegal's private client team by email at by telephone 020 7539 8000 (London office), 0118 958 5321 (Reading office) or by completing the form on this page.

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