Scottish Daily Mail
A WELCOME MOVE, BUT BUYERS ARE STILL GREEN WITH ENVY
Few people like paying tax but Scots house buyers may be looking across the Border with more than a little jealousy today. Changes announced this week to property tax – Stamp Duty Land Tax in england and Northern Ireland and Land and Buildings Transaction Tax (LBTT) in Scotland – have created an even bigger gap than existed in the amount payable on a house purchase.
It’s the way both governments have reacted to the enormous impact Covid19 has had and will continue to have on the property market.
People buying a £500,000 house in Scotland will still have to pay £21,250 in LBTT while someone engaged in the same value purchase south of the Border will pay zero Stamp Duty.
Further up the market, buying a £750,000 property will result in a tax bill of £46,250 in Scotland but £12,500 in england. Angry as some people may be, it is better than expected as initial feedback from Scottish Ministers was that there were no plans to replicate Rishi Sunak’s giveaway on wednesday.
My company had argued for a more radical approach in Scotland, with an extension of the zero rate of LBTT from £145,000 to £325,000.
THIS would have the same ‘effect’ as the Chancellor’s changes as it would have taken 90 per cent of house purchasers out of LBTT altogether.
It would also have resulted in a saving of up to £5,850 for prospective house buyers.
Still, I am sure the decision to make purchases up to £250,000 taxfree in Scotland will be welcomed by many, particularly as the average house price in the country is just under £180,000.
This is not a figure to be sneezed at. Many first time buyers in edinburgh, for example, will be paying this kind of price so they stand to save £2,100 when the changes take effect. with mortgage lenders now demanding higher deposits, the extra £2,100 first-time buyers can devote to their house purchase – instead of going on tax – could make it easier to get a loan.
even though Scotland has not gone as far as england, this week’s changes will be welcome. If you are working in the housing market like I am, your livelihood is dependent on housing market activity.
This includes all manner of occupations and professions, like construction workers building new homes, surveyors conducting valuations, photographers taking pictures of properties and legal firms involved in conveyancing work.
After lockdown, people who may have wanted to move house have felt unable to. For example, older people who may have considered downsizing have decided not to due to the health risks involved.
we have to entice people back into the market so that activity makes up for lost ground in March, April, May and June. Before the coronavirus crisis struck, things had been looking very positive in the Scottish housing market. In 2019/20, the number of transactions reached 105,000, which was around 1,000 higher than the year before.
The LBTT ‘take’ to March this year was £288million, which was 10 per cent up on the year before. By the following month, when lockdown had been in place for only a few weeks, LBTT revenue was down 67 per cent on April 2019.
we, at Rettie, feel changes are needed to LBTT like reducing or removing the tax for older people to encourage downsizing.
The fact is, 55 per cent of revenue comes from sales between £350,000 and £750,000 so it would be very difficult for the Scottish Government to give up this income.
So house buyers in that bracket will have to continue to look to england, green with envy.