Archive for December, 2014

Is your will out of date?

Thursday, December 18th, 2014

756d86ef6cee41c58f8761d5e4acb192Wills can be made 20, 30, 40 or even more years ahead of when they are to come into effect, they have no expiry date and remain valid until they are revoked or replaced.

Have any of the following life changing events happened to you:

(a)  Moving home?

(b)  Emigrating or immigrating?

(c)   Changing job or retiring?

(d)  Having a child or grandchild or acquiring a son-in-law or daughter-in-law?

(e)  Losing a close relative?

(f)   Getting married, entering a civil partnership or starting to cohabit?

(g)  Getting divorced?

(h)  Setting up a business?

(i)   Winning the lottery or becoming bankrupt?

If any have, you should consider whether your Will needs to be updated.

Moving Home

If you or one of your beneficiaries simply changes address then there is no need to update your Will.  However it can be useful to let us have a note of the new addresses to put with your Will so that your beneficiaries can be contacted more easily in the event of your death.

When you purchase your first house, you now own a valuable asset, and you may wish to consider who you would want to inherit it when you die.  If you buy jointly with a partner and you are not married, then if either of you were to die without making a Will, it could be your nearest family members and not your partner who inherit your share of the house, not perhaps the outcome you would expect or wish.

If you already have a Will which leaves a specific legacy of your current house to someone, if you sell your house, you may need to change your Will to include your new house instead, or to provide for the sale proceeds being given to the beneficiary instead of the house itself.

Change of Assets

We generally advise people to be careful of leaving legacies of specific items in their Will because, for example, an item of jewellery could be lost, you could change your car or move to a different bank.

If you are lucky enough win the lottery or inherit a large sum of money, you should really consider getting some financial advice and doing some inheritance tax planning.

When setting up a limited company you should consider if there are provisions in place to make sure that the shares are passed on to the correct people in the event of your death. The terms of the company’s Articles of Association would need to be considered to ensure there were no inconsistencies between them and your Will. If you were previously a partner in a partnership and this is turned into a limited company, any reference to the partnership in your Will would no longer be valid.

Immigrating and Emigrating

Simply changing your domicile or where you live, does not by itself revoke a Will you have made in the past.  If you have made a Will in England and move to live permanently in Scotland, your English Will would still apply.  Should you die without making a Will, however, the law of intestacy which sets out who would inherit your estate is different north and south of the border.

If you own heritable property abroad, then you should take advice on preparing a separate Will in the country in which this property is situated.

Changing job

When you change job, you should check that any pension plan benefits are nominated in favour of the person you wish to inherit.  Often these do not form part of your estate when you die and are paid out at the discretion of the Trustees of the Pension Plan, usually to your nominated beneficiary or your nearest or dependent relatives.

Changes in family members

If one of your beneficiaries gets married or changes their name there is no need to update your Will.  Again it would be useful to let us have a note of this information to keep with your Will.

Should someone who is mentioned in your Will either as an Executor or a beneficiary die, you may wish to consider appointing someone else in their place.  If one of your beneficiaries dies, then their children or grandchildren could take their share in their place, if your Will has been worded this way.  If your family increases, you may wish to review your Will to make sure that it includes all the people you wish it to benefit.

In the event that you separate from your partner or get divorced, any Will you made previously is not automatically revoked.

If you would like to make your first Will or review your current Will, please contact either our Philip Dawson (p.dawson@jgcollie.co.uk) or Vivienne Bruce (v.bruce@jgcollie.co.uk) by email or telephone on 01224 581581.

Stamping out Stamp Duty

Thursday, December 18th, 2014

stamp-duty_420-420x0Over two years prior to the historic independence referendum in September 2014, the Scottish Parliament had been given significant additional powers under the Scotland Act 2012.

These powers included the ability to lower or raise income tax rates by up to 10 pence in the pound as well as control over stamp duty.

Since 2003, Stamp Duty Land Tax (SDLT) has been the tax applied on the purchase of land and buildings throughout the UK.  Tax rates have been consistent and the tax payable identical, whether a property was being purchased in Dundee or Derby.

This similar treatment is about to end.  In October the Scottish Government announced the rates and bands for the new Scottish equivalent for SDLT, Land and Buildings Transaction Tax (LBTT), to take effect from 1st April 2015.  This was designed as a revenue neutral approach with the most expensive properties paying for lower costs for the majority of property buyers.  The “tipping point” was £325,000.  For purchases less than this amount, less tax would be payable; for purchases above this figure, more tax would be due.

One aspect of the old system which often caused a distortion in the housing market was the sharp increase in tax rates above certain thresholds.  For example it was always a challenge to sell a property valued at £260,000 as the SDLT rate jumped from 1% to 3% at £250,000.  Any purchase above £250,000 was charged at 3% on the full price, not just the proportion above this threshold, resulting in an immediate £5,000 tax hit on crossing the £250,000 barrier.  LBTT has progressive tax rates, eliminating these artificial distortions.

Then, on 3rd December 2014, during his Autumn statement, the Chancellor, George Osborne, announced a very similar reform to SDLT.  This immediately introduced UK wide changes to the rates of tax and thresholds.  These are different from the Scottish LBTT rates which are due to take effect next April and means that the “tipping point” will now be £254,000.  In other words, in Scotland it will be more expensive to buy a property in excess of this amount than it would to buy a similar priced property in England.

The Scottish Government estimates that 80% of home buyers will be either no worse off or better off under LBTT than the recently reformed SDLT.  However the effects will be felt differently in various parts of the country.  According to official figures, in the third quarter of 2014, the average price of a property in Scotland was £170,000.  In Aberdeen it was £221,000.  The latest ASPC figures show that the average price for a detached house in Aberdeen is £360,000.  Until the end of March the tax due on a purchase at this level will be £8,000.  From 1st April 2015 the tax payable will jump to £13,300.  This will only apply in Scotland – an equivalent purchase in England will still incur the £8,000 tax charge.

Here are figures to illustrate the changes:-

Purchase Price SDLT Pre December 2014 SDLT December 2014 – March 2015 LBTT from April 2015
£150,000 £1,500 £500 £300
£275,000 £8,250 £3,750 £4,800
£450,000 £13,500 £12,500 £22,300
£600,000 £24,000 £20,000 £37,300

It remains to be seen how these tax changes will affect the Scottish property market. There may be a rush to buy and sell higher priced properties in the first quarter of 2015, prior to the new tax rates taking effect.  Lower priced properties are already benefiting from the lower rates which have applied since the beginning of December.

2014 has been a good year for both property sale volumes and sale prices in the Aberdeen area, with the number of sales and prices returning to levels not seen since the 2008 downturn.  It will be interesting to see how LBTT impacts on the local market in 2015.

For further information regarding SDLT/LBTT or property purchase or sale generally, please contact Brian Sutton by email at b.sutton@jgcollie.co.uk or on 01224 581581.