Wednesday 22^nd November saw the presentation of the Autumn Budget and with it came changes to Stamp Duty Land Tax for first time buyers.

WHAT IS STAMP DUTY LAND TAX (SDLT)?

Stamp Duty Land Tax (SDLT) is a tax which is payable if you buy any property  in England, Wales or Northern Ireland. SDLT is calculated against the value of the property and the rate that you pay depends on your personal circumstances.

HOW IS STAMP DUTY CHANGING?

Before the changes came into effect first-time buyers paid stamp duty at varying rates on any purchases of residential property above £125,000.00.

The Treasury has now stated that this threshold will be raised to £300,000.00 effective immediately. It is estimated that this increase will mean 80% of first time buyers will now pay no stamp duty. The Treasury estimates that the changes will help over one million first-time buyers get onto the housing ladder over the next five years.

Any purchases between £300,000.00 and £500,000.00 will also be liable for a reduction in SDLT under the reforms.

Any purchases above £500,000.00 will receive no discount to SDLT.

AM I A ‘FIRST TIME BUYER’?

For the purposes of this discount a first-time buyer is defined as someone who has ‘never owned freehold or leasehold property before and who is purchasing their only or main residence.’ 

If you have ever owned any residential property before anywhere in the world then unfortunately you will not qualify.

In a joint purchase, all purchasers would need to fall within the above definition of ‘first-time buyer’ to qualify for the reduced rates.

WHAT WILL I SAVE?

If you are buying a property that costs more than £125,000 and up to £500,000 you will save money.

Under the previous rules 2% SDLT was payable on every pound above a property value of £125,000 , up to £250,000, while a 5% rate currently applies on the band between £250,000 and £925,000.

For example; under the old rules a first-time buyer purchasing a property for £200,000.00 would be liable for £1,500.00 in SDLT. However, under the new rules, no tax will be payable on this transaction.

Similarly, a first-time buyer purchasing a property for £300,000 would have been liable for  £5,000.00 in SDLT. However, under the new rules, no SDLT will be payable on this transaction.

A £10,000 tax bill on a £400,000 property is being reduced to £5,000 and a £15,000 charge on a £500,000 home goes down to £10,000.

If a first-time buyer purchases a property that costs between £300,000.00 and £500,000.00 then the first £300,000.00 is free from SDLT and the amount between £300,000.00 and £500,000.00 will be taxable at 5%. For example; a purchase at £400,000.00 would have previously attracted a SDLT bill of £10,000.00, this has now been reduced to £5,000.00.

Unfortunately, there has been no change is the SDLT regime for purchases over £500,000.00 and these purchases will still attract SDLT at the previous rates.

Stamp Duty changes for first-time buyers
Property price	Stamp Duty before budget	Stamp Duty now
>£125,000 (England and NI)	£0	£0
£200,000 (England, Wales, NI)	£1,500	£0
£300,000	£5,000	£0
£400,000	£10,000	£5,000
£500,000	£15,000	£10,000
Above £500,000	no change

WANT TO KNOW MORE

If you are thinking of purchasing a property and if you want to know more about the SDLT changes then please call a member of our experienced Conveyancing Team who will happily discuss the transaction and your eligibility with you.

https://fmc-solicitors.com/what-we-do/property/

Simon Saunders LLB

FM&C Solicitors

11A Hill Street

Saffron Walden

Essex

CB10 1EH

Simon.saunders@fmc-solicitors.com

+44 (0) 1799 526 849 / 077026

When buying a property with another person, one of the most significant considerations for you should be how do you wish to own the property together?

There are two ways in which a couple can jointly own a property; as Joint Tenants or as Tenants in Common. Joint Tenants each own the whole property, this means that if one were to die, then the whole property passes automatically to the survivor.

Tenants in Common on the other hand, own a defined share. This can be in equal measure, so each owns 50% of the property, or it can be in unequal measure to reflect, for example, unequal contributions (and supported by a Declaration of Trust.) Unlike with Joint Tenants, when one owner dies, their share does not pass automatically to the survivor but instead is distributed according to their will (or rules of intestacy if no will is made.)
Why does it matter how you own the property and what considerations should be made?

Firstly, you may wish to consider financial contributions. Let’s say that one of you has a lump sum from a previous sale of a property in your sole name. You would be making a significantly greater financial contribution than the other party. If you simply own as Joint Tenants, then you each have as much legal interest in the property as the other. Should you later split up, you would of course expect your share to be taken into account when dividing sale proceeds.

Secondly, families are becoming more and more fragmented with second marriages increasingly common. If you have children from a previous relationship whose inheritance you wish to protect, how you own your property is crucial. If you own as Joint Tenants and are the first owner to die, then the whole property passes to the surviving owner. As time passes and they move on, how can you guarantee that they honour your wishes?

Both of these scenarios are perfect examples of when ownership as Tenants in Common would be appropriate. You can further protect your interest by way of entering into a Declaration of Trust. A Declaration of Trust is a legal document drawn up to clearly set out respective shares of co-owners. Let’s go back to our first example where one party was contributing a greater lump at the outset. For arguments sake, imagine they contributed £100,000 towards a £300,000 purchase. A Declaration of trust could be drawn up that gives the first owner, on a sale, the first £100,000, then half of the proceeds thereafter.

In our second example where you have an owner wishing to protect the interests of children from a previous relationship, but perhaps, the contributions are pretty much equal. It would be appropriate for them to own as tenants in common in equal shares.

You may think that after many years of co-ownership, everything reverts to fifty-fifty in any event. Case law has shown that trusts that might usually arise in these circumstances simply do not apply where a Declaration of Trust exists.*

One more consideration would be the advantage of holding a property as Tenants in Common where debt is concerned. If creditors are seeking to seize assets, in a property owned as Joint Tenants a creditor can seize the whole property. If the property is owned as Tenants in Common, a creditor in a bankruptcy scenario can only seize the share of the bankrupt party.

When you next purchase a property with a co-owner, think carefully before ticking “Joint Owners” and speak to your Solicitor if in doubt. At FMC we can prepare a simple Declaration of Trust for £300 plus VAT. That’s a small price to pay to protect yours and your family’s financial interest and peace of mind.

If you would like to obtain a quote for your property sale or purchase, please click on the following link: https://fmc-solicitors.com/what-we-do/property/

*Stack v Dowden 2007; Pankhania v Chandegra 2012

Little does the eager, starry eyed entrepreneur know that perhaps the greatest risk he or she is taking is not the uncertain income stream, the investment in tools, machinery, websites, logos, advertising and inventory, nor is it the one staff member taken on the receive clients, or sort flowers, or take calls, or help grow the business. The greatest risk is that fairly wordy piece of paper he was rushed to sign by a pushy estate agent, it said something about a lease on the front page. Not to worry though, after all, everybody needs a lease right?

Well yes, but there are leases and leases. This particular entrepreneur unfortunately did not do so well, the service she was offering was not what people wanted, or the flowers he was selling were not the taste of the locals, the economy crashed two months after he moved into his new shop, or the supplier she had relied on pulled out. For whatever reason, businesses sometimes fail. Time to sell off the inventory in the back and close shop. Not so fast though, that piece of paper you signed actually forces you to pay the rent for the next four years, and stops you from sub-letting the shop, and requires you to fix the windows, and the door and even the roof! As if watching your own business fail was not punishment enough, you now are facing severe financial stress because of a lease.

 

If you are considering starting a business and looking for suitable premises come talk to us. We can help you make sure that you are limiting your exposure to risk and focusing on building a thriving business.

Aaron Menuhin works in the Commercial Conveyancing department and is contactable at the Haverhill Office 01440 761 200 or by email at aaron.menuhin@fmc-solicitors.com