Author Archive: Muhammad Zia

How will Brexit affect your overseas property, pensions and investments?

Since leaving the European Union in December last year, much of the focus has been on how it will affect your business. But what about your personal assets?

In this blog, we will look at the key changes affecting property, investments and other personal assets based in the EU.

Your State Pension (if you moved to the EU before or by 31 December 2020)

If you were living in an EU country by 31 December 2020, you are covered by the EU Withdrawal Agreement. This means that you will continue to receive your State Pension and it will increase in line with rates in the UK. Private pensions should continue to be paid interrupted.

Your State Pension (if you move to the EU after 31 December 2020)

You can carry on receiving your UK State Pension if you move to live in the EU, EEA or Switzerland and you can still claim your UK State Pension from these countries. It will also be increased each year in the EU in line with the rate paid in the UK. Private pensions should continue to be paid interrupted.

Will and estate planning

Don’t panic – your existing Will continues to cover all of your overseas assets, even after Brexit. But creating multiple Wills could speed up the time it takes for those assets, such as property and investments, to be released after your death.

This is because your existing English Will may need to be translated and notarised in the foreign jurisdiction your assets belong to.

EU succession regulation

The EU succession regulation was introduced in 2015 to make it easier to administer estates across the single market. Simply, the regulation provides that where EU citizens have assets in two or more countries, a single law of succession will apply to their estate on death – usually the law of the state in which the deceased was habitually resident at the time of death.

However, the landowner can choose the law of the state of their nationality instead. This can be used to side step forced heirship rules in countries such as France.

Inheritance Tax

As a UK-domiciled individual, Inheritance Tax will apply to your worldwide estate. Non-UK domiciled individuals, however, will only be taxed on the part of the estate that is based in the UK.

Get expert advice today

For help and advice on any related matters, please get in touch with our expert Brexit advisory team today.

Getting prepared for the financial challenges after lockdown

It is vitally important as we come out of the year-long lockdown and hopefully into a brighter future, that businesses are fighting fit and ready to take on new challenges and opportunities ahead.

In simple terms, it’s a case of knowing your numbers and being on top of your business, so you can react quickly, as and when things change.

There are several factors to consider when monitoring your financial health that will help your business survive and thrive.

Budget

It is a good idea to set a budget for your business at least annually, although some businesses may benefit from reviewing their numbers quarterly to keep a closer eye on the figures to make sure the incoming funds outweigh their outgoings.

A good budget will factor in a degree of flexibility or continuity to allow your business to adapt to market conditions – especially given the current UK economic climate. Budgets that are too stringent can stunt business growth by not allowing the business to pursue opportunities that may arise.

Cash flow

Positive cash flow is also critical for the success of your business and businesses need to be aware that problems can arise over investment which can be in stock, employees, marketing and fixed assets etc.

Although bulk buying can save money from lower purchase prices thanks to economies of scale, holding too much stock ties up cash and can lead to losses if the stock is perishable or seasonal so the benefits need to be carefully weighed up.

Employment costs

Employment costs are often one of the highest costs incurred by a business. Again, there is a fine balance between having the right number of the right staff to service your clients and run your business, without over-investing or spending.

Monitor late payments

Recent research has revealed that late payment of invoices is the cause of one in five company insolvencies, with many larger companies being the major cause of cash flow problems among the small and medium-sized enterprise (SME) community. This is why SMEs need to also think efficiently about business decisions, such as who they do business with.

Other factors

Other areas to be wary of are over-trading, which occurs when a business expands too quickly, putting pressure on short term cash flow and seasonal demand, where there are predictable changes in trade and cash flow.

Also, be prepared for any unexpected changes from internal changes, such as loss of key staff or machinery breakdown, to wider economic issues like the current global pandemic.

Forecasting

Any forecasting and financial modelling will need to be as accurate and comprehensive as possible to help you manage and maintain your cash flow.

Testing your plan ‘on paper’ before you make any costly changes or investments helps you establish the financial implications of the plan for your business.

Preparing a detailed forecast will help take your vision forward with clear-cut short and long-term action plans.

It can measure results, adjust tactics and activities to manage risks and keep the business on target, as well as improve co-ordination across different departments and motivate your team to work towards a common goal.

Build the business on paper and identify new opportunities to capitalise on, and evaluate their feasibility and impact.

Management accounts will help!

This is where regular, accurate management accounts can help.

They allow you to keep your finger on the pulse of your business. Where forecasting and financial modelling looks into the future of your business, these work in harmony to monitor and assess the impact of any changes you put in place as they happen.

Effective bookkeeping and strategic planning

An effective bookkeeping system is essential for the management of your finances. This is where you can combine in house expertise and skills with the capabilities of various cloud accounting software programmes to tap into incredible business intelligence.

An effective strategic planning process should involve an independent adviser to facilitate your discussions and allow everyone to remain well-informed and participate in the process equally. An adviser, such as an accountant, will also explore the different views and opinions in the team, using them to enrich the strategy without derailing the discussion.

Strategy development involves collecting and analysing data on clients or customers, competitors, your marketplace, financial performance and the opportunities. Getting an impartial view on what this information means for your business brings new insights and ideas to the team.

In strategy, pace is a key consideration. Building your business too quickly or too slowly can reduce your team’s commitment to the plan and the enthusiasm to implement it.

A skilled adviser will manage the pace for the team and equip them with the information they need to get the fundamentals right, while accelerating the growth process when needed.

If you would like a hand delving deeper into the numbers behind your business, so that you can make effective strategic decisions, please contact us.

Stamp duty break sparks surge in house prices

UK house prices increased by 8.6 per cent in the year to February 2021, as buyers rushed to complete transactions before the stamp duty deadline, which has since been extended, according to the latest statistics released by the HM Revenue & Customs (HMRC) and the Office for National Statistics (ONS).

The UK Property Transactions Statistics showed that in February 2021, on a seasonally adjusted basis, the estimated number of transactions of residential properties with a value of £40,000 or greater was 147,050. This is 48.5 per cent higher than a year ago. Between January 2021 and February 2021, UK transactions increased by 23 per cent on a seasonally adjusted basis.

The data also showed that there were 180,690 UK housing sales in March, the highest monthly sum since the Revenue started publishing monthly transactional data in 2005.

Nick Whitten, head UK living research at JLL, a global real estate consulting company specialising in the provision of real estate services in the UK, said that the increased numbers were a result of people trying to sell in advance of the stamp duty deadline.

Mr Whitten said that the surge bolstered the case for the abolition of stamp duty. He said: “The rush to take advantage of the Stamp Duty holiday shows that it is a hugely inefficient tax which is ultimately a potential hindrance to the future of economic prosperity of the UK. It makes no sense for people to find themselves ‘locked-in’ to their current home because of the tax burden of moving. People need to be able to migrate towards opportunities as easily as possible in the 4th Industrial Age and as part of the levelling up agenda.”

Other industry voices were bullish, talking about the strength of the property market. Jeremy Leaf, former residential chairman of RICS, said: “Despite strong growth in house prices already, we are confident that there is enough demand to ensure there will not be a price correction, despite the tapering of the stamp duty holiday from the end of June. Our view is reinforced by the rollout of the vaccine and easing of lockdown restrictions which is boosting confidence in the economy and easing fears of a spike in unemployment when the furlough scheme is due to close on 30 September.”

For our expert advice on property tax, please contact us.

New 95 per cent mortgage scheme launched

As house prices in the UK soar to record levels, lenders are now starting to offer mortgages to borrowers offering a deposit of just five per cent under a new Government guarantee scheme from April.

The policy, announced in the March 3 Budget, is designed to help more first-time buyers secure a home. Analysts also suggest that cheaper deals are available for those able to stretch to a 10 per cent deposit.

The scheme is like policies previously used to boost the housing market and the economy, as well as offering support to those buying a home for the first time. The new scheme will be available to anyone buying a home costing up to £600,000, unless they are buy-to-let or second homes.

The Government is offering a partial guarantee, generally of 15 per cent, to compensate lenders if the borrower defaults on repayments. The guarantee is designed to give lenders the confidence to offer 95 per cent loan-to-value mortgages – many of which were withdrawn during the Covid crisis.

Lloyds, Santander, Barclays, HSBC and NatWest have started to offer products this month and Virgin Money will do so next month. However, some lenders such as Halifax, which is part of Lloyds Banking Group, and Barclays have said that these products will not be available for new-build properties.

Chancellor Rishi Sunak said: “By giving lenders the option of a Government guarantee on 95 per cent mortgages, many more products will become available, boosting the sector, creating new jobs and helping people achieve their dream of owning their own home.”

However, lenders will still carry out affordability checks. Anyone who has lost a job, or whose income has been sporadic owing to the pandemic’s effect on employment may find it difficult to secure a mortgage. House prices have been rising – partly because of Government stimulus, and there are concerns too about the potential for some to fall into negative equity if this is followed by sharp falls in property values.

Some of the new mortgage rates are close to four per cent for a two-year fixed rate deal. For example, rates on NatWest’s new 95 per cent mortgages will start at 3.9 per cent.

Lloyd Cochran, head of mortgages at NatWest, said: “It reflects the extra risk the bank is taking on. I think over the long term that is a pretty competitive rate for customers.

“One of the things we do is ensure that the customer can afford that rate. We also ensure… the customer can afford that loan if interest rates were to rise.”

Michelle Andrews, HSBC UK’s Head of Buying A Home said: “We have supported home buyers and the wider housing market throughout the pandemic and are excited to support the Mortgage Guarantee Scheme.

“After such a turbulent year it is great that this scheme will make a real difference in enabling first time buyers who didn’t think they would have a chance of getting a mortgage and home movers to get the keys to their new home.”

For expert advice on investing in property, please contact us.

How can landlords benefit from Stamp Duty holiday?

Although the primary focus has been on first-time buyers, landlords and property investors can benefit from the Stamp Duty Holiday and the extension announced in the Spring Budget.

Before 8 July 2020, buy-to-let Stamp Duty rates were as follows:

Three per cent up to £125,000
Five per cent between £125,001 and £250,000
Eight per cent between £250,001 and £925,000
13 per cent between £925,001 and £1.5 million
15 per cent above £1.5 million

So, if you purchased a £500,000 buy-to-let property before the Stamp Duty changes took place, you would have paid £30,000 (three per cent of £125,000, five per cent of the next £125,000 and eight per cent of the remaining £250,000).

Until 1 July 2021, landlords and property investors are only required to pay a three per cent flat-out fee up to the raised threshold of £500,000. So, instead of paying £30,000 in Stamp Duty on a £500,000 property – you would only pay £15,000.

After that date and until 30 September 2021, this threshold will be lowered to £250,000. Landlords can still benefit from this ‘interim’ period. For example, if you purchase a buy-to-let at £250,000 between these dates you would pay a three per cent stamp duty fee of £7,500.

However, if you purchased this same property on 1 October 2021 (when stamp duty rates go back to normal) your stamp duty charges would be £10,000 (three per cent of the first £125,000 then five per cent of the remaining £125,000).

Buy-to-let property purchases above £500,000 will also be subject to additional Stamp Duty rates. Here is a quick break down of the brackets:

Three per cent up to £500,000

Eight per cent between £500,001 and £925,000

13 per cent between £925,001 and £1.5 million

15 per cent above £1.5 million

For any advice please contact us.

More than 700,000 landlords could struggle with rent arrears by the end of 2021

According to research by LSE London and Trust for London, the number of private tenants in rent arrears in England could treble in the coming year.

This could mean that more than 700,000 tenants and their landlords may get further into financial difficulty.

Since the Government introduced its eviction ban in March last year, landlords have had limited options to remove tenants and recover rents.

The restrictions and new rules on repossession of residential properties were first introduced because of the original Coronavirus lockdown.

It was initially only intended to last three months but has now been extended several times to assist tenants who have been adversely affected by the pandemic.

In September 2020, some courts began to clear the backlog of repossession claims, starting with the most serious involving domestic violence or anti-social behaviour. A further ‘Christmas truce’ was then introduced.

Landlords were then due to start serving eviction notices from the 11 January 2021, but under pressure from tenants and charity groups, and with new COVID-19 restrictions in place, the Government extended the ban further.

Whilst there have been calls for a ban on repossessions and evictions from some groups, the National Residential Landlords Association has said the Government is making the situation worse by allowing tenant’s debts to accumulate.

This is because, despite the eviction ban, the rent on properties remains due and so millions of pounds of arrears have now built up on properties across the UK.

This has left many landlords in a difficult situation, where they not only face losing their investment properties but also their own homes, in some cases, due to being unable to cover the cost of their buy-to-let mortgages.

As with the previous bans, tenants and landlords are being asked to communicate with one another and discuss alternative arrangements. Where possible, tenants should continue to make rental payments to the best of their abilities.

If you have seen a considerable decline in your rental income due to the COVID-19 restrictions and the eviction ban then you should seek advice. We can help you to review your finances and look for opportunities to manage your costs during this difficult period. To find out more, please contact our experienced property tax specialists.

Thousands sign Stamp Duty petition

A new petition for the triggering of the Stamp Duty holiday upon exchange of contracts has been launched on the Government’s official petition website.

The campaign, launched in April, will run for six months. It has already gained over 4,000 signatures, having attracted more than 1,700 signatories within 24 hours.

Chris Holland, who created the petition, confirmed it had gone live on Westminster’s official petition.parliament.uk website.

Mr Holland said: “People are finding themselves becoming trapped in a scenario whereby house prices are much higher, and at the same time they will now miss out on the stamp duty holiday. People are being financially punished from both sides, this from a policy that was designed to do the exact opposite.

“Exchanging contracts is exactly what it says. A contract, a legally binding agreement, to purchase a house often with an immediate 10 per cent deposit being paid. So why shouldn’t you benefit from the stamp duty holiday being triggered at that moment of exchanging contracts, rather than at the point of completion? This will allow in particularly new build buyers, with continuous building delays due to COVID-19, to benefit from this policy.

“If you can help in any way it will be greatly appreciated.”

Petitions posted on Westminster’s official petition.parliament.uk site are guaranteed a Government response if they accrue more than 10,000 signatures.

If a petition gets more than 100,000 signatures on that site it will be considered for a debate in Parliament.

The last major SDLT petition, which called for the Government to extend the stamp duty holiday until September 2021, led to a debate in parliament – it attracted more than 150,000 signatures.