New Year (Some) New Rules

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While the calendar year is already a third of the way through, the financial year is just beginning. As with most financial years, some key points stay the same (or at least much the same) while some change. With that in mind, here’s a quick rundown of the property-market-related new-year news.


IHT and the RNRB stay the same

The Inheritance Tax threshold (nil-rate band) stays at £325,000 and the Residence Nil-Rate Band stays at £175,000. The RNRB is an extra nil-rate band that applies when transferring a person’s main home to a direct descendent upon their death. The IHT rate also stays the same i.e. 40%.

This lack of change arguably qualifies as news since the Chancellor’s “post-COVID19” budget could easily have included a raid on people’s estates.


Lifetime ISAs now have the standard withdrawal penalties

In response to the effects of COVID19, the government reduced the penalty for making unsupported withdrawals from Lifetime ISAs from 25% to 20%. It is now back at 25%. The Lifetime ISA allowance remains at £4000 per year to a maximum of £20,000 (plus a 25% bonus on eligible withdrawals). Other ISAs have different allowances, benefits and rules.


The Stamp Duty holiday has been extended

This has been so widely publicized for so long that probably everyone knows about it already. That said, in case you somehow missed it, the SDLT holiday will be extended until the end of June. Then it will be tapered off with a reduced discount applying until the end of September.


Help to Buy v1 has been extended

The original Help-to-Buy scheme has been extended (again). It is closed to new applications but people already accepted on it will have until the 31st of May to complete their purchases. Help to Buy v2 has been introduced as planned.


Mortgage guarantees are back

The “new” 95% mortgage guarantee scheme looks remarkably similar to the old version of the same scheme. Qualifying buyers (including onward movers) can have the government guarantee up to 15% of a 95% mortgage. Effectively, they can quadruple their deposit.

In principle, this could make them eligible for mortgages they would otherwise have been refused. It could also qualify them for lower interest rates (due to the better loan-to-vehicle ratio). In practice, it remains to be seen if either of these outcomes will actually happen. It also remains to be seen if the scheme will lead to house-price increases.

The new mortgage guarantee scheme is scheduled to run until December 2022. As always, stay alert to potential changes to this date.


Mortgage interest tax relief is gone

Technically, this is actually news from the 2020-2021 tax year. In fact, you could argue that it is actually news from the 2017-2018 tax year when mortgage interest tax relief started to be phased out. The 2021 calendar year will, however, be the first year landlords file tax returns without being able to claim any mortgage tax relief at all.


Tax is going digital

If you are a landlord operating through a limited company and registered for VAT then from April 2022 you will need to have a digital tax account whether you want one or not. You’ll also need to come to terms with quarterly tax returns as opposed to annual ones. If you don’t already have a digital tax account, it’s highly advisable to get one set up in plenty of time.


The property-income allowance and rent-a-room schemes stay

If you’re just looking to make a bit of extra money from property, then you might be interested in the property-income allowance and/or the rent-a-room scheme. Either (or both) could be a good way to give your finances a post-COVID19 boost.


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