by Jen Lemen
Hot Topic Highlight - Leasehold Reform Consultation and the Autumn 2018 Budget
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This week, we are going to look at two hot topics for Autumn 2018; the recently published consultation on leasehold reform and the Autumn 2018 Budget. This will be relevant for a variety of pathways, including Building Surveying, Building Control, Quantity Surveying & Construction, Residential Property, Valuation and Commercial Property.
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Consultation on Leasehold Reform
What is the latest position?
The UK Government has released a consultation on leasehold reform, which would make it unlawful, in almost all circumstances, to sell a leasehold house. Houses would, instead, be sold almost exclusively on a freehold basis.
It is proposed that this will apply if the property has been held as freehold at any time and was acquired after 22 December 2017.
There is also a proposed £10 p.a. limit on new ground rents.
Would any exemptions apply to the ban on the sale of leasehold houses?
Yes, proposed exemptions include shared ownership and community-led housing, as well as houses situated on National Trust land.
How might the cap on ground rent work?
It is proposed that this will come into force in Spring/Summer 2020, 3 months after the legislation is likely to come into force. There may be some exceptions for retirement and mixed use leasehold property and it is proposed that the cap will apply to replacement leases, e.g. implied surrender and re-grant where the demise is altered.
How will the proposals be enforced?
It is proposed that this will be via registration at the Land Registry, whereby it will not be possible to register a long lease of a house or a ground rent above the proposed cap.
Do the proposals cover anything else?
Yes, they also discuss the definition of a house, ways to speed up the process of purchasing leasehold properties and legislation relating to communal service charges paid by freeholders.
When does the consultation close?
26 November 2018.
Autumn 2018 Budget
What is the Budget?
In the UK, HM Treasury sets an Autumn annual Budget for the following tax year. An update is provided in the Spring Statement, also known as the ‘mini Budget’. Both include proposed changes to public sector expenditure and HMRC revenues (i.e. tax).
When was the latest Budget released?
29 October 2018, by Chancellor of the Exchequer, Philip Hammond. This is the last Budget which will be released before Brexit, in 2019. The aim of this Budget was to prepare the country for a ‘new chapter’ in the economy.
What are the key changes relating to personal taxation and wages (from April 2019)?
- Personal allowance (i.e. income level over which income tax is paid at 20%) raised from £11,850 p.a. to £12,500 p.a., this is a year earlier than originally proposed
- Higher rate income tax (40%) threshold raised from £46,350 p.a. to £50,000 p.a.
- After this, the two rates will increase in line with inflation
- National Living Wage increased by 4.9% from £7.83 p.h. to £8.21 p.h.
- Universal credit work allowances increased by £1.7bn
What are the key changes affecting the property sector?
- SDLT liability remove for first time buyers of shared equity homes up to £500,000
- Input of £500m into the Housing Infrastructure Fund, enabling construction of a further 650,000 homes
- Lettings Relief limited to where the owner shares occupation with the tenant
- Housing Association partnerships in England proposed to deliver 13,000 new homes
- £1bn guarantees allocated for smaller house builders
- 30% growth in infrastructure spending
- £30bn improvement measures for England’s roads, e.g. motorway and pothole repairs
- £10m allocated to deal with abandoned waste sites
What are the key changes affecting businesses?
- 2% digital services tax from April 2020, relating to UK revenue of large technology companies
- PFI contracts to be abolished
- Annual Investment Allowance increased from £200,000 to £1m for 2 years
- Apprenticeship Levy contributions for small companies reduced from 10% to 5%
- Business rates for properties with a Rateable Value under £51,000 to be reduced by 1/3 over 2 years, which it is proposed will benefit 90% of independent shops, pubs and restaurants by approximately £8,000 p.a.
- Additional business rates relief for small businesses of £900m, £650m allocated to improving the state of the UK High Street and 100% mandatory relief for public lavatories
- Tax on plastic packaging which contains less than 30% recyclable material
What are the forecasts for the economy in 2019?
- Austerity is ‘finally coming to an end’
- Growth forecast for 2018 downgraded from 1.5% in March to 1.3%, as a result of the poor Spring weather
- Growth forecast for 2019 upgraded from 1.3% to 1.6% and those for 2020, 2021, 2022 and 2032 upgraded to 1.4%, 1.4%, 1.5% and 1.6%
- Employment positive with 3.3m more people in work since 2010 and 800,000 more jobs proposed by 2022
- Wage growth the highest in nearly 10 years
- Public borrowing £11.6bn lower for 2018 than forecast in March, which represents 1.2% of GDP
- £500m additional spending allocated to Brexit preparation
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Stay tuned for our next blog post to help build a better you
N.b. nothing in this article constitutes legal or financial advice.