Budget 2016: Beneficiaries of inherited residential properties

Finance Act 2015 introduced a number of tax restrictions on the finance costs relating to a residential property business for income tax purposes (s272A and s272B ITTOIA 2005).

The main consequence of these changes is to effectively restrict the tax deduction of finance costs to the basic rate of income tax. For further details regarding these provisions please refer to our guidance produced for the Summer Budget 2015.

The announcement to date clarifies that the above legislation introduced in Finance Act 2015 will equally apply to the beneficiaries of deceased person’s estate.

As the interest restrictions have not yet come into force – the first interest restrictions will apply from April 2017 onwards – the announcement merely clarifies the position for beneficiaries of inherited residential properties.