By Legal Futures’ Associate The Cashroom
Brexit uncertainty has cast a dark shadow on the UK since the referendum in 2016. Following that date, the property market started to show signs of a slowdown, forcing the Government look for ways to stimulate the sector.
A popular tool in the Government’s arsenal has been recent amendments to stamp duty land tax (SDLT). Unfortunately, many within the sector feel there has been an imbalance of help. Whereas some sections of the property market have been offered a property lifeline, others feel persecuted and exploited.
Currently, an individual property valued between £125,000 and £250,000 will be liable to 2% SDLT on the value of the property. This then increases on a sliding scale from 5% on properties priced between £250,000 to £925,000 rising to a 12% duty on properties valued over £1.5 million.
First-time buyers Vs Buy-to-let investors
Following the referendum, the Government announced a ‘relief’ for first-time buyers which allowed a SDLT free purchase on any property valued under £300,000 with a significant reduction on property up to £500,000.
In total, 288,300 first-time buyers have saved £680 million since the relief was launched in 2017. Whilst some changes have had a positive impact on the bottom end of the property market, other legislative amendments to SDLT have been met with less popularity.
Indeed, buy-to-let investors were left reeling when a surcharge of 3% was added to SDLT contributions on all additional property. This has been a lucrative tax, bringing in almost £5 billion to Governmental coffers since its introduction in 2016.
In recent months, investors have attributed these surcharges as the catalyst for a landlord exodus from the sector which is starting to increase rents in the private rental sector.
A Residential Landlord’s Association survey of over 6,500 landlords found that almost half (46%) were looking to reduce their investments as a result of recent changes they feel are onerous and unfairly weighted in favour of the tenant.
Landmark cases altering the SDLT landscape
Recent court rulings could bring about more SDLT changes which have the potential to help owners of additional dwellings in dilapidated conditions.
The owners of an asbestos filled bungalow won their legal fight against HM Revenue and Customs (HMRC) recently, reducing the £7,500 surcharge imposed SDLT contribution to the normal rate of £1,500. The legal precedent claiming that a surcharge can only be charged to properties considered immediately habitable could also be set.
Conversely, those using tax avoidance schemes by charging an annual annuity rather than paying an amount over the SDLT threshold were presented with a blow after HMRC won both a court case and appeal against a stamp duty expert using an avoidance scheme.
SDLT manipulated by leadership candidates
Overall, the Government has highlighted this tax as a way of stimulating a flat market. Boosting property sales will also help to boost SDLT contributions which were 21% down in the opening quarter of the year compared with Q4 of 2018. They had also declined by 5% on the figures from Q1 2018 and fallen by 18% on SDLT contributions from five years ago.
New leadership candidates have used SDLT as a way of appealing to the voters and reinvigorating a stuttering market place. Boris Johnson promised the public that an administration with himself at the helm would overhaul SDLT by increasing the threshold to £500,000 for all property buyers, effectively ending stamp duty on all averagely priced property – including London where the average property would cost £484,584.
In a bid to appeal to the whole electorate, Johnson has also promised to reduce the increased duty on prime property by reversing the 10%-12% threshold and returning it to pre-2014 levels between 5% and 7%. In addition to increasing buyer demand, it is thought that property prices will also begin to increase nationally by as much as 4.5%.
Let The Cashroom team ease the legal cashiering burden
As with all legislative changes, conveyancing departments need to ensure they remain aware of the implications on their clients. However, when conveyancers take so much responsibility for SDLT, it is imperative that legal professionals remain up to date as mistakes could be reputationally damaging.
Here at The Cashroom, our team of qualified and experienced legal cashiers can be on hand to unburden busy conveyancing departments by-
- Monitoring banks for receipt of monies
- Quickly and efficiently spotting activity and setting up payments
- Taking care of payroll duties
- Generally improving efficiency and enabling law firms to remain compliant with SRA Account Rule changes.