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When taking out a commercial loan, you might be asked to put up some of your assets as security against the borrowed sum in the event that you default on repayments.

In some cases, this might be property.  If you decide to go down this route, you may need to grant a ‘legal charge’ over your property – a document giving your lender a legal interest in your property and the right to sell the property to reclaim the debt if you cannot repay it.

One of the most common questions we receive is how to put this into place.

Our experts respond

Dashna Morarji-Sagoo, a Solicitor in our Banking and Finance team, said: “This is a relatively straightforward process if there are no prior existing legal charges granted in favour of any other lenders.”.

“Assuming there are no prior legal charges, and the new legal charge is to be granted in favour of a lender, the lender will provide you with a form of legal charge.”.

“If the property is already subject to legal charges, if these are to remain, it is likely that the consent of the prior lender will need to be obtained before any new legal charges are granted.”.

“If on the other hand, the prior legal charges are to be removed before the new charge is granted, it will be necessary for us to liaise with the existing lender to obtain the relevant release forms and deal with the redemption of any sums of money due to that lender.”.

“This will also increase the legal costs of granting a charge over your property.”.

“Depending on the internal policy of the lender, the lender may require some property due diligence to be undertaken in relation to the property.  This again will increase the legal costs of granting a legal charge over your property.”.

“The legal charge will need to be registered at HM Land Registry and possibly Companies House.”.

The cost of a legal charge

Dashna continued: “Assuming that there are no other third-party lenders involved and this lender does not require any property due diligence to be undertaken, I would estimate that the costs associated with this would be in the region of £1,000 – £1,500 (plus VAT and disbursements).”.

“As referred to above, the costs will increase if legal charges have already been granted to any other third parties.”.

“Please also bear in mind the borrower will also be responsible for paying the lender’s costs in relation to the legal charge.”.

“That said, the normal practice is for the lender to agree its legal costs with you, in advance, any costs or expenses it incurs.”.

“Usually, the lender will use lawyers on its panel for the transaction so that discounted rates are applied (which are cheaper than the normal rates for solicitors) and the lender is likely to obtain two/three quotes for you to select from.”.

“The lender’s costs will vary depending on who it uses, but could be in the regions of £1,500 – £2,000 (plus VAT and disbursements).”

For advice on commercial loans and security, please contact Dashna at DashnaMorarji-Sagoo@palmerslaw.co.uk or by calling 07903 631780.

The Chancellor’s Autumn Budget on 30 October brought in immediate changes to the rates of Capital Gains Tax (CGT) – increasing the basic and higher rates to 18 and 24 per cent respectively.

Additionally, revised rates for Business Asset Disposal Relief (BADR) were announced with a staggered introduction, with significant implications for those planning to sell a business.

From 6 April 2025, BADR rates will rise to 14 per cent, reaching 18 per cent by 6 April 2026.

Depending on the level of taxable gains, this could represent a substantial increase in tax for business owners planning their exit via a sale.

How will this impact the market?

The staged rise of BADR rates is likely to prompt a flurry of sales from business owners who are either:

• Already in the process of selling
• Considering selling in the next few years.

We expect to see more opportunities for mergers and acquisitions (M&A) activity, as well as management buyouts, creating a window for proactive buyers and investors.

Achieving a swift sale

If you are looking to sell your business and wish to minimise your tax liability on taxable gains, you may consider bringing the sale forward.

This should be supported by a solid plan for what you hope to achieve, with an idea of target buyers and the market potential of the business.

You can facilitate this by getting your business in the best possible position to sell with:

• Paperwork – Collate and review all legal and financial documents and resolve any obvious discrepancies or issues.
• Valuation – Know your business’ value and its market position and appeal.
• Intellectual property – Secure your key IP and define its value to the business.
• Employees – Make sure that you have reviewed all employment contracts and you have a plan in place for staff retention.
• Early advice – The legalities of selling a business can be complex, so seek early advice from a solicitor to make the sale process as efficient as possible.

For advice on selling your business and optimising the process, contact our team to discuss your options.

For many people, your pension will form a significant part of your estate and may hold significant value by the time you finish paying into it.

Some pensions can be passed on to loved ones as inheritance, including spouses, children or grandchildren, if it is unspent in your lifetime.

While many people choose to spend their pension in full, there are many reasons why this might not be the case, including:

• Being supported by someone else, such as a working spouse
• Having a larger pot than you need
• Choosing to minimise spending to pass money to your beneficiaries
• Early death.

Pension pots are a popular way to pass a substantial portion of your estate to your loved ones tax-efficiently as this money is not subject to Inheritance Tax (IHT) – but this is changing.

The 2024 Budget

In a bid to close a £22 billion “black hole” in public finances, Chancellor Rachel Reeves announced changes to the rules around IHT in the Autumn Budget.

From 6^th April 2027, unspent pension pots will be brought into the scope of IHT.

This will have a significant impact on your ability to pass down wealth to your loved ones tax-efficiently – making it more important than ever to plan proactively.

The Government is also scaling back key reliefs, limiting the full 100 per cent benefit of Agricultural Property Relief and Business Property Relief to the first £1 million of combined assets, with the reliefs dropping to 50 per cent beyond that.

With this in mind, you should be looking at planning ahead to minimise the IHT due on your estate.

Reducing your bill

For many people, bringing pensions into the scope of IHT will result in an inevitable increase in the IHT due on their estate.

However, there are steps you can take to mitigate this, including:

• Gifting – Under current legislation, you can draw down 25 per cent of your pension tax-free up to the value of £268,275, and you can use some of this as a gift, which will not be subject to IHT provided you live for seven years or more afterwards.
• Use allowances – Your executors will not pay IHT on the first £325,000 of your estate, but this can rise to up to £500,000 if you pass your home to a direct descendant.

Remember that anything passed to your spouse is free from IHT, including gifts made during your lifetime from your pension.

To plan your estate and pass on as much as possible to your loved ones, contact our team to discuss your needs.

The National Minimum Wage (NMW) and the National Living Wage (NLW) have undergone significant increases this year and last.

For the first time, the NLW was extended in April 2024 to 21- and 22-year-olds, rising to £11.44 per hour. For those between 18 and 21, the NMW was set at £8.60, and at £6.40 for apprentices and those under 18.

Following the 2024 Autumn Budget, these rates are set to rise again to:

• NLW – £12.21
• NMW (18-21) – £10
• NMW (Under 18 and apprentice) – £7.55

All employers must pay workers at least the appropriate rate of NMW/NLW. This is a legal requirement unless you work in a specific circumstance, such as being self-employed.

If you are concerned that you are not being paid at the minimum legal level, it is important that you address this with your employer.

Checking your pay

When the NLW and NMW increase, your employer is responsible for updating their payroll accordingly from the date the rise is implemented.

If you think you are not being paid correctly, initially raise the issue with your employer – using your payslip as evidence.

You are entitled to the appropriate minimum wage level whether you are paid by salary or hourly pay.

It can be more complex to work out your entitlement if you are paid via a salary, but it is important you do so as this is where underpayment often slips under the radar.

Calculate your hourly pay with the basic annual hours outlined in your contract and divide this by the number of pay periods per year – typically 12 if you are paid monthly.

You can then divide this figure by the amount in each pay packet, giving you your hourly rate.

For example, if your annual hours is 1,950 (around 37.5 hours per week), you work an average of 162.5 hours per month.

Divide a pay packet of £1,600 (pre-tax) by the figure and the hourly rate works out at £9.85 per hour.

This is now below the NLW and will soon be below the NMW for over 18s as well – but the difficulty is that, not long ago, this was an acceptable wage.

If you started a role at a certain salary, it is important that you review it regularly to ensure that you continue to receive the wage to which you are entitled.

Escalating a dispute

Many difficulties with being paid at the correct rate arise from error or changes in legislation.

However, if your employer still refuses to pay you according to your entitlement, you can make a complaint to HM Revenue & Customs (HMRC).

HMRC can send your employer a notice to pay you correctly in addition to providing you with any arrears, in addition to a fine.

HMRC can also take your employer to Court on your behalf if the dispute cannot be resolved, or you can go directly to the Employment Tribunal yourself.

You cannot be dismissed for asking to be paid at the NLW or NMW. If you are, you may be able to claim for unfair dismissal.

Contact our team for further advice and support on your wages.

The Government has announced a rise in Stamp Duty Land Tax (SDLT) on Additional Dwellings from three per cent to five per cent.

Additionally, companies buying dwellings for over £500,000 are facing an increased flat rate of 17 per cent, up from 15 per cent in the same time frame, which is set to push up the cost of commercial purchases of high-value properties substantially.

This additional rate is due when you buy a residential property that is not your main residence, whether as a second home, a buy-to-let property or part of a corporate portfolio.

The Government hopes that this will free up the market for people looking to buy their primary home by making it less financially appealing to invest in additional properties.

What does this mean for adding to your portfolio?

SDLT and investment

Residential property is a popular investment option for individual landlords and commercial private housing providers.

However, the rise in SDLT on Additional Dwellings will make it more expensive to purchase these properties, making higher-value residences particularly costly.

It is likely that we will see a decrease in the number of individuals investing in residential properties as costs become prohibitively high compared to the cost to those buying their main home.

For commercial enterprises, it will depend entirely on whether the risk of additional costs is outweighed by the return on investment (ROI) on the property in the long term, as well as available cash reserves to meet higher initial costs.

Mitigating these costs

The Chancellor brought in new legislation around SDLT with immediate effect, giving investors little time to plan and no opportunity to expedite purchases.

However, you can still take steps to reduce the overall burden, including:

• Engaging in thorough due diligence of the property’s classification and use.
• Identifying any potential issues such as necessary works that could increase costs.
• Carefully negotiate the cost of the property to potentially cut SDLT or move into a lower band.
• Acquire mixed-use properties with residential and commercial elements, as this could incur a lower rate of SDLT.
• Purchase via a limited company, as this can result in a reduced liability, particularly when transferring properties to a connected company.

We can also help you to minimise the cost of the sales process with our conveyancing experts and our diverse experience with contracts, searches and surveyors.

For advice on residential property purchases and SDLT, please contact our team.

Essex-based Palmers Solicitors is getting in the festive spirit to support the children’s wards at its local hospital trust.

The firm is once again stepping up for its long-term chosen charity, the Polly Parrot Appeal, with a very special ‘Guess The Name’ competition, featuring a fantastic Christmas teddy! 

Open to all staff across the firm’s five offices and clients who wish to participate, the competition will be open until 20 December, when the bear’s identity will be revealed.  

All proceeds will go towards the appeal, run by the Basildon and Thurrock University Hospital to support paediatric patients and services, including children’s oncology and the neonatal intensive care unit.  

The appeal also funds support for children visiting loved ones or being seen as outpatients. 

Gina Newman, Practice Manager, said: “We’re long-time supporters of the Polly Parrot Appeal and we know that it’s particularly important at this time of year, when it’s exceptionally difficult for children to be spending time in hospital.  

“This competition is shaping up to be lots of fun, as well as an excellent opportunity for us to show our support for the incredible work that Basildon and Thurrock Hospitals do for the community and for children who need their help.  

“A huge thank you to everyone who has helped set it up and taken part so far – we look forward to announcing the winner and finding out what we have raised for our charity partner!”