Industry wants same banding across UK

Call to bring homes tax into line with England

Property for saleHousing trade body Homes for Scotland has urged the Scottish government to raise the tax levy on higher priced homes in line with the system south of the border.

It wants the 5% band, currently applicable to homes priced between £250,000 and £325,000, to be applied to homes valued up to £925,000 as in England.

In Scotland, home buyers pay 10% on homes valued above £325,000.

The industry has expressed concern over the impact that the Land and Buildings Transaction Tax (LBTT), introduced a year ago, is having on the wider housing market.

Responding to a call for evidence from the Scottish Parliament Finance Committee, Homes for Scotland said the tax was having a “detrimental effect” at the middle to higher end of the market.

The Scottish government has said that the differing systems recognise the sharp differences in valuations.

However, in some parts of Scotland, such as Edinburgh and Aberdeenshire, critics say higher priced properties are facing an enormous tax burden compared to similar properties in England.

Some argue that under the Scottish tax system the price differentials only really apply to the Home Counties, while prices in the rest of England are closer to Scotland and that the tax bands should therefore be similar.

Karen CampbellHomes for Scotland director of Policy Karen Campbell (right) said: “The impact of the new rates and bands varies between market segments but a real additional burden has been placed on some buyers and this is clearly affecting sales as many people are choosing not to move as they find the cost too high.

“There is also a disproportionate effect in regions such as Aberdeen, Aberdeenshire and Edinburgh where the average family home commonly exceeds £325,000.”

Highlighting the problem, Ms Campbell said a new four bedroom family home in Edinburgh costing £475,000 would attract an LBTT of nearly £21,000 – £6,600 more than what was due under the previous stamp duty system, and £7,100 more than in England. 

She added: “Given that people purchasing at the higher end of the market tend to be discretionary movers, meaning they are choosing to move rather than having to because of circumstance, our concern is that, by staying put, they block others from progressing onto or up the property ladder and thus exacerbate the country’s housing crisis. 

“That is why we are suggesting that the current five per cent band be extended up to the price 

Current LBTT bands in Scotland
Current LBTT bands in Scotland

ceiling of £925,000, mirroring the position south of the border to help ensure Scotland remains an attractive place in which to invest. 

“This is all the more important given the fact that LBTT generated lower than expected receipts from housing transactions in its first year, with the gap plugged by income from the non-residential sector.

“It remains to be seen if this could be achieved again given the already evident post-Brexit impact on commercial property investment.”

In March this year former Finance Secretary John Swinney faced criticism from one Borders based businessman over the LBTT.

Dr Alan Walker criticised Mr Swinney over the government’s tax policies, claiming they were discouraging talented staff moving to Scotland.

Dr Walker, chief executive of Ryboquin and a delegate at a life sciences conference in Edinburgh, told Mr Swinney: “I am trying to build a significant biotech company in Scotland through merger and acquisition but people will not move to Scotland.

“They see it as more expensive to buy a house and there are rumours about a differential in income tax between England and Scotland. Our chief scientist will not move out of London.”

Mr Swinney was forced to accept that the tax rose sharply above that threshold and that “behavioural responses” by individuals was something for the government to consider.

But he said it was important to take into account other factors and the attractions of moving to Scotland.

“People have to look at this in the round. They will find here a greater cohesiveness among institutions than the rest of the UK.”

However, he said the government had to be “mindful” of how people responded to government policies on tax.

Mr Swinney was forced to concede in April that the LBTT revenue from homes had fallen short of expectations.

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