Nine out of 10 higher-rate and every lower-rate taxpaying landlords who sell will see their capital gains tax (CGT) bill rise in April, analysis from Hamptons reveals.

The hike comes due to the annual personal allowance being cut from £12,300 in 2022/23 and £6,000 in 2023/24 to £3,000 in 2024/25.

SPRING BUDGET

For most higher-rate taxpaying landlords who sell the cut will offset the CGT rate cut from 28% to 24% announced in the Spring Budget.

Those landlords will see their CGT bill rise by £454 or 4% in April while the average lower-rate taxpayer’s bill will increase by £1,674.

Aneisha Beveridge, Hamptons

Aneisha Beveridge, Head of Research at Hamptons, says: “Although the Chancellor made it clear he was hoping to encourage landlords to sell up and add new housing supply into the market for first-time buyers, the reality is that the capital gains tax changes taken as a whole will likely act as a disincentive. Most landlords leaving the market this year will end up paying more tax than two years ago, not less.

She adds: “Recent changes to CGT will hit landlords making the smallest gains hardest. Typically, these will be newer millennial investors who have seen less price growth, or those selling cheaper homes in less expensive parts of the country. Meanwhile, older investors who’ve been landlords for longer and have accumulated bigger gains are much more likely to benefit from the tax cut.”

WORSE OFF

The lower personal allowance coupled with lower tax rates means any higher-rate taxpaying landlord reporting gains of less than £68,000 will find themselves worse off.  Meanwhile, those reporting larger gains will find themselves better off.

Beveridge adds: “The Chancellor’s changes to CGT rates only apply to higher-rate taxpaying landlords with homes in their own names.

“Meanwhile, the growing number of investors with homes held in companies pay corporation tax on their sale proceeds after costs instead.

“While tax efficiency has been the major draw of a company structure, increasingly it’s also the certainty and stability it offers. Chancellors’ have generally proved less likely to tinker with company tax rules than individuals.”

The latest Hamptons Lettings Index also reveals rental growth continued to cool in February with the average rent on a newly let home in Great Britain rising 7.1% year-on-year.

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Most agents believe the recent Budget was a wasted opportunity, and the Government doesn’t know how to help the property industry.

Findings from two major surveys reveal the discontent among estate agents with Chancellor Jeremy Hunt (main picture) and other ministers responsible for housing policy.

Inadequate

A poll of 833 property professionals, commissioned by GetAgent, found that the vast majority were disappointed with the lacklustre Budget.

More than a quarter (27%) described the Budget as ‘inadequate’, and a further 54% said it was ‘underwhelming’.

The industry had been expecting an announcement on a 99% mortgage, but this was scrapped just days before, a decision that 56% agreed with.

Stamp Duty

There had been hopes of another Stamp Duty reduction, and 71% believe this should have been included by the government.

Two thirds (67%) said there should have been a buyer incentive introduced to help kick-start the market, with 64% stating they would have liked to have seen more focus on housing supply.

And a massive 83% think more should have been done to improve the homebuying and selling process.

The Tory party may as well have ignored the property market altogether.”

Colby Short, Co-founder and CEO, GetAgent

Colby Short, Co-founder and CEO of comparison platform GetAgent, says: “During what is likely their last budget for years to come, the Tory party may as well have ignored the property market altogether.

“Despite predictions, or maybe hopes, that there may have been stimulii for the property market, none were forthcoming.”

Meanwhile, in a snap poll of 160 letting agents carried out by tenant referencing firm Goodlord, 75% of respondents said they didn’t think the Government understood the pressure facing the sector.

And a further 19% weren’t sure, with just 6% saying they thought the Government truly understood.

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Over the past few weeks, the shadowy side of the real estate world has been brought to the forefront.

It was reported that an Azeri tycoon used dirty money to acquire a £50 million property empire in London and a former Bangladeshi land minister in the UK has quietly amassed over 350 properties, totalling nearly £200 million.

These incidents raise significant questions about how effectively we monitor foreign money entering the market. These were sophisticated schemes but there’s no doubt conveyancers, estate agents and lenders will need to be increasingly vigilant to do their part in preventing money laundering.

The property market remains a hotbed for dirty money. However, we can strengthen compliance by using technology that promotes transparency and upholds the integrity of the financial ecosystem.

AZERBAIJANI

Last week, the National Crime Agency (NCA) alleged that Azerbaijani politician and businessman, Javanshir Feyziyev and his wife Parvana acquired 22 homes, mostly purchased jointly, using the proceeds of crime and corruption. They used a complex network of shell companies across various jurisdictions, including the Marshall Islands, Seychelles and the British Virgin Islands, to channel funds for properties in the UK, such as two in Belgravia’s Chelsea Barracks.

The NCA claims the scheme involved forged invoices, false accounting, and deceptive transactions, including those labelled as “payment for nutritious baby food.”

This story is one of many that we see cropping up in the news and demonstrates there are loopholes, especially with funds flowing through multiple countries. Verifying sources of funds and strengthening international cooperation and information-sharing among regulatory authorities could help address these cross-border challenges.

LAUNDERING PROBLEM

The UK has a long-established money laundering problem in the property sector, particularly in the lavish streets of London. Transparency International’s 2023 ‘Through the Keyhole’ report details how almost 52,000 UK properties are still owned anonymously despite a new transparency law designed to reveal their true owners.

High asset values, complex ownership structures, large financial transactions and gaps in legislation make it easier for criminals to legitimise dirty money via the property market, making it a prime target. As a result, laundered money infiltrates the economy, weakens stability and distorts market dynamics.

Generally, there are too many areas in the UK’s financial institutions where dubious funds can slip through the net. An example in property is that the conveyancing sector has strict rules on establishing the source of funds, while mortgage lenders don’t have similar scrutiny on lump sum mortgage repayments.

PLUG HOLES IN A DAM

Regarding anti-money laundering (AML), it’s like trying to plug holes in a dam. While implementing source of funds checks during property purchases acts as a significant hurdle, money launderers are now actively seeking alternative weak points throughout the entire property ownership process.

Ensuring the legitimacy of funds is a shared responsibility for all involved parties, but legal firms often bear the brunt of conducting source of funds checks. Despite their best efforts to align with AML standards, the number of operating firms within the sector presents a considerable challenge for regulators. The diverse landscape of legal entities engaged in property transactions adds complexity to the regulatory landscape, emphasising the need for comprehensive and adaptable oversight in this crucial aspect of financial compliance.

OPEN BANKING

Every day, property and conveyancing businesses are swamped with huge amounts of paperwork, slowing down processes and making the truth harder to keep track of. Open Banking gathers key information from a buyer or seller’s account to determine where the funds have come from. This technology, together with AI and machine learning, is key to unlocking effective AML checks as it provides transparency for all parties involved, and can help firms identify riskier customers.

It eliminates the need to manually verify a client’s funds as well as ownership of accounts. A client check can also be conducted across multiple bank accounts, providing the required information from those accounts in a single report. Ultimately, this also makes it easier for legal professionals to conduct necessary AML checks and spend less time on data collection and verification, both lengthy tasks.

FINANCIAL BEHAVIOUR

Open Banking enables legal professionals to focus on the reasons for the financial behaviour, rather than the data itself. This is especially useful for legal firms based in areas of the country with high property prices, like London, which must take extra care when processing property funds.

Cracking down on dirty money pumping through the UK is simpler than we think.

In essence, we must reduce our relationship with paperwork and use technology that makes property transactions quicker and more transparent. At the same time, regulators and industry players must work together to implement and enforce robust AML protocols to cover all parties involved in a property purchase.

Mike Ward (main picture) is Executive Chairman of Armalytix

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A warring family has taken to the High Court to settle its differences over a £2.6 million property portfolio.

Tajleena Islam claims her parents and brother used her gold and jewellery to invest in property in East London.

Islam, aged 43, says she was given gold coins and heirlooms by her grandparents and other relatives.

Her mother Sultana and father Mohammed, who died in 2017, took the valuable items as well as £150,000 cash inheritance and used them to build the portfolio, she claims.

Victim

Now Islam is suing her 79-year-old mother and older brother Rahit, aged 53, in the High Court over ownership of the five properties, of which she says she owes half.

She says she was the victim of “undue influence” in signing over her stake in the properties.

‘Melodrama and lies’

But Islam’s mother and brother deny the claims, saying the portfolio belongs solely to them. They say Islam is prone to “melodrama and lies”.

Acting for the mother and son, George Woodhead said Islam had provided “scant” evidence that there ever was a collection of gold and jewellery.

‘No evidence’

“To say that, whilst living rent-free under their roof, [the daughter] was a co-contributor of capital to her parents’ purchase of investment property is inherently unlikely, and there really is no evidence to properly support that supposed fact,” he said.

Judgement in the case will be given later.

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A rogue landlord who illegally converted a property into six flats has been ordered to pay more than £220,000 after Haringey Council successfully prosecuted the company.

A previous unlawful change of use into five flats led to Pathfield Estates being ordered to return the property in Bounds Green to its original condition by a 2008 planning enforcement notice.

INVESTIGATION

However, an investigation launched in 2020 found a new six-flat conversion, in breach of the 2008 enforcement notice led to the company being convicted at Highbury Magistrates Court in 2021.

The action was brought by the council under the Proceedings of Crime Act.”

The magistrates referred the case to the Crown Court for sentencing and the start of confiscation proceedings brought by the council under the Proceedings of Crime Act (POCA).

Pathfield lodged two appeals against the conviction – firstly to the Crown Court (dismissed in June 2022) and then to the High Court (dismissed in July 2023, with an order to pay the Council’s costs of £11,100).

ORDERED TO PAY

At its sentencing last month, the company was ordered to pay £226,433.18p made up of a £50,000 fine for not complying with the enforcement notice, a confiscation order under POCA of £163,258 to reflect its financial benefit from breaching the enforcement notice, plus a further £13,175.18p in costs.

Councillor Sarah Williams

Councillor Sarah Williams, Haringey Council’s Cabinet Member for Housing Services, Private Renters and Planning, says: “This conviction serves as a warning to disreputable landlords operating in our borough.

“Our residents deserve to live in safe, high-quality homes and we will not hesitate to take strong action if landlords flout planning laws or leave tenants to languish in poor conditions.

“I want to thank our planning enforcement team who worked tirelessly to get this result.”

Read more about Haringey Council’s housing clampdown HERE.

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Estate agencies face being targeted in a new HMRC crackdown on tax avoidance announced by Chancellor Jeremy Hunt (main picture) in last week’s Budget.

The Chancellor said private debt collection agencies would be used to identify companies that have failed to pay tax, The Times reports.

He gave HMRC an extra £35 million a year for the task, and said that hundreds of officers would help raise £4.5 billion within five years.

Clampdown

A clampdown on cryptocurrency tax evasion that is expected to bring in £205 million over the next five years, was also announced.

A total of £43.9 billion is owed to HMRC, up from £20 billion before the Covid pandemic.

Tax dodge

In October, HMRC warned landlords that a new kind of tax dodge scheme being promoted to landlords is illegal and may result in a bigger bill.

The schemes, which are sometimes called ‘hybrid business models’, are advertised as a way of avoiding capital gains and inheritance tax.

Daily fines

Bypassing mortgage interest relief restrictions is one of the ways the schemes are designed to reduce tax, HMRC said.

Any individual who is behind one of these schemes can be fined £600 per day initially, rising to a penalty of £1 million.

Late payments

Meanwhile, the cost of late payments to small businesses has more than doubled in two years to £1.6 billion, according to accountancy firm Xero.

Xero found that small firms were on average paid six days beyond their agreed terms, The Times reports.

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Propertymark supports a new crackdown on landlords in Manchester, but warns that letting agents must be more involved for it to be effective.

The city’s Mayor Andy Burnham (main picture) launched his initiative in January, saying it would target “untouchable” operators who refuse to maintain their properties properly.

Burnham said the health of tenants was “put at risk” by BTL investors who fail to spend money on the upkeep of their rentals.

Minimum standards

The Charter will be a voluntary programme for every type of landlord. Each will need to demonstrate that they are currently hitting the legal minimum standards of renting to become a member.

Landlords’ body the NRLA (National Residential Landlords Association) earlier welcomed the charter, but warned that it must be backed up with support for struggling rental operators.

Sign up

Now, Propertymark says letting agents must be able to sign up for the charter as well as those who operated PRS properties.

And it encouraged the Greater Manchester Combined Authority to raise awareness of funding opportunities like the Disabled Facilities Grants for landlords and property agents, to help disabled tenants access their homes.

Propertymark supports this initiative, but it is vital that letting agents are more involved.”

Tim Thomas, Policy and Campaigns Officer, Propertymark

Tim Thomas, Policy and Campaigns Officer at Propertymark, says: “Propertymark supports this initiative, but it is vital that letting agents are more involved.

“They play a crucial role in helping landlords to comprehend and comply with their legal obligations, and ensuring that properties are safe to rent alongside assisting tenants with finding an appropriate property to rent.

Public face

“Agents also have a more public face than landlords, and there is a lot they can do to demonstrate that they are members of the Good Landlord Charter.”

They can display stickers on their windows proving that they are members, or promote their membership on social media, he says.

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A landlord duo have been prosecuted by Camden Council and ordered to pay a hefty fine of £350,000 and costs of nearly £250,000 between them.

The individuals who were described as “wealthy” by a judge, failed to comply with a planning enforcement notice originally issued against substandard flats (main picture) in 2010.

Fine and costs

They were joint owners of a Camden property which they had illegally sub-divided into seven substandard flats when they only had approval for four.

A court ordered a fine of £350,000 and full costs of £247,011 in Camden’s favour against Joel Salem, aged 65, of Highview Gardens, Finchley and Judith Robinson-Dadoun, aged 57, of Brampton Grove, Hendon

Guilty

The landlord duo were previously found guilty in 2020 for their failure to comply with an enforcement notice for the property at 52 Fortune Green Road in West Hampstead (main picture).

The defendants had continued to receive rents until the property was sold in April 2021.

Both defendants bear high culpability in respect of their failure.”

Judge David Aaronberg said: “Both defendants bear high culpability in respect of their failure to have complied with the enforcement notice.

“Each was, at various times, involved in the management and running of 52 Fortune Green Road, in breach of the notice.

Concealed

“Mr Salem is a wealthy individual who has contrived, over many years, to produce an elaborate and impenetrable network of shareholdings, directorships and property assets initially in order to reduce tax liabilities and also, in the present context, to conceal his true wealth from the court.

“As with Mr Salem, I am satisfied that she [Judith Robinson-Dadoun] has concealed her true financial worth from the court”.

The Judge also mentioned the following property-related companies that are associated with the defendants:

• MNY Property Management Ltd
• Salem & Dadoun Partnership
• Outside Management Systems Ltd
• United Properties London Ltd
• Imperial House London Ltd
• Minster Road Investments
• Platinum Riverside Ltd
• Dynamic 101 Ltd
• Lonfandi Properties
• Gold Wynn Group
• Topland Group

Pic credit: Google Streetview

Read more about HMO fines.

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