The Scotsman

Scotland needs to level the taxation playing field

◆ Make the country an attractive place to work, live and invest in to encourage economic growth, writes David Alexander

- David Alexander is CEO of DJ Alexander Scotland Ltd

What a resilient lot the Scots are. They pay the highest income tax in the UK, pay substantia­lly more in property taxes to buy their homes than their English counterpar­ts yet, despite this, remain committed to working and living in Scotland.

The latest figures show that property taxes in Scotland, raised through the Land and Buildings Transactio­n Tax (LBTT) totalled £616.6m in the 12 months to February 2024. While this is slightly lower than the same period in 2022/23 when £623.0m was raised it is £212.8m (52.7 per cent) higher than the pre-pandemic figure of £403.8m in 2019/20.

Almost all the taxes raised arose from properties sold for more than £325,001. The 16,350 transactio­ns above this threshold raised £349.2m which is 82.7 per cent of the total £422m raised in LBTT (this is the figure for residentia­l sales with the ADS figures removed). This means that the average tax levied per transactio­n was £21,357.

If these buyers were to purchase their home in England, then they would not start to pay property tax of 10 per cent until the value of their property was greater than £925,000. By contrast, in Scotland, a home costing £325,001 is the starting point for the 10 per cent levy. Furthermor­e, 12 per cent is charged on properties selling for more than £750,000 whereas south of the Border this level does not kick in until £1.5m. It is clear, therefore, that Scottish homebuyers are being charged considerab­ly more in tax for the privilege of owning a home north of the Border.

Interestin­gly, of the £616.6m taxes raised £194.6m is from the additional dwelling supplement (ADS) which is charged on second homes and properties purchased by landlords and property investors to rent. This is 31.6 per cent of the total raised and is £40.4m higher than the same period in 2022/23.

It is unclear what the breakdown of sales between second homeowners and property investors is but the number of second homeowners in Scotland has fallen 40.7 per cent since its peak of 40,599 in 2012 dropping to 24,061 in 2023.

This substantia­l increase in purchases by investors, landlords and second homeowners indicate a considerab­le confidence in the Scottish market. Given the punitively high taxation paid by this group of buyers it is testament to their resilience and belief in the Scottish market that they are buying properties in ever larger numbers. They are contributi­ng substantia­l levels of tax to the Scottish purse and should be encouraged to invest more in the future.

Of course, nobody can predict whether this will continue. There are already reports that it is becoming increasing­ly difficult to attract high quality applicants for certain jobs due to the much higher rates of personal taxation in Scotland and it will naturally follow that if the better paid don’t come then the housing market will be impacted.

We need to ensure that Scotland is an attractive place to work, live, and invest in if the economy is to grow in the future. Fair taxation, whether personal or on property, plays a key role in maintainin­g our country’s appeal. Ensuring Scotland is competing on a level playing field is surely the minimum that can be asked if the economy is to grow, and the country is to flourish.

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 ?? ?? The Land and Buildings Transactio­n Tax raised £616.6 million in the 12 months to 2024
The Land and Buildings Transactio­n Tax raised £616.6 million in the 12 months to 2024

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