Main Menu

Finance Secretary revises property bands

Swinney bows to 5% homes tax but hikes top bracket levy

John SwinneyHalf of homebuyers will pay no tax under revised proposals outlined today by Finance Secretary John Swinney who has caved in to demands for a 5% rate on higher priced homes.

He is raising the band before tax is liable from £135,000 to £145,000, freeing up another 10,000 homes in a move to counter claims that he has been forced into a u-turn.

However, those buying homes at the top of the market will pay more as the 12% threshold will now kick in at £750,000 instead of £1 million.

Homes costing between £145,000 and £250,000 will be subject to a 2% rate while a new 5% rate will apply to those priced between £250,000 and £325,000.

The initial 10% rate that would have started at £250,000 will now be paid on homes costing between £325,000 and £750,000. But the top rate of 12% will now begin on homes above that price.

Mr Swinney said that under the new bandings, 50% of buyers will pay no tax while more than 40,000 in total will pay less on buying a new home.

Land and Buildings Transaction Tax (LBTT) – will replace UK Stamp Duty Land Tax from April. Mr Swinney’s initial bands would have left thousands of middle class homebuyers paying 10%. The Scottish Tories led calls for similar bandings announced by George Osborne, the Chancellor shortly after Mr Swinney published his own reforms.

Under Mr Osborne’s bandings the 10% rate starts on homes costing £500,000. Mr Swinney argues that his LBTT takes account of the lower cost of homes in Scotland.

The revisions were broadly welcomed, with some reservations that the top of the market will continue to be penalised.

Top end estate agency described the changes as disappointing news for buyers and sellers of Scottish homes and “far from offering the hoped-for stimulus to the middle of the property market.”

Andrew Rettie, head Strutt & Parker in Scotland, said: “While LBTT will help first time buyers – the average price of a house in Scotland is £170,000 – it has been widely derided as an unfair attack on families and a punitive tax on aspiration, particularly in the affluent centres of Glasgow, Edinburgh and Aberdeen. The changes announced today are no better.”

The Scottish Tories, who joined the property industry in challenging the LBTT rates, said Mr Swinney has only used £53 million of the £64m freed up by Westminster’s tax cuts, leaving an extra £11m still to be passed on to taxpayers.

They have urged him to use that extra money to increase the amount at which the 10% kicks in to somewhere higher than £325,000.

Conservative finance spokesman Gavin Brown said: “This is an encouraging start and indicates some progress in creating a fairer system that benefits everyone.

“However, there is still £11 million to be used, and we will work to try and ensure that is passed onto those striving to buy a family home in the area they live.

“The threshold of £325,000 still represents quite a jump to go to 10%, and in certain areas of Scotland that will still be a punishing measure. We need to ensure there is not a Scotland-only tax on aspiration.”

Philip Hogg, chief executive of Homes for Scotland, shared concern over the higher rates. “It remains to be seen whether the sharp 10% increase for purchases above £325,000 could still prove too punitive on growing families and aspirational movers, leading them to stay put and others unable to progress up the housing ladder,” he said.

The Scottish Property Federation (SPF)  said it was pleased to see the intermediate 5% rate band added, a rate SPF chairman John Hamilton recommended.

The SPF described the new thresholds as a boost for not just homebuyers, but the wider property industry, “as it will mean that the Scottish residential market will not be disadvantaged by selling homes with higher tax bands than their UK counterparts.”

However, the SPF expressed concern that the highest rate of LBTT for the commercial property sector is too penal, and could cause Scotland to suffer a competitive disadvantage as it seeks to attract property investment.

In his statement today Mr Swinney said:

• 90% of tax payers better or no worse off than under UK Stamp Duty Land Tax

• more than 90,000 taxpayers will be better or no worse off under the Scottish system than under UK Stamp Duty Land Tax,

• all those buying a residential property in Scotland for £330,000 or less will pay up to £400 less tax under LBTT, or will pay no tax at all.

• 99.9% of residential transactions will pay less LBTT or no LBTT at all, compared to the proposed rates and bands in October. Only those buying a home for more than £945,000 will pay more in tax under our new plans, compared to our Draft Budget proposals.

Mr Swinney, referring to his initial proposals, said: “My priority was then, and remains now, to help first-time buyers to enter the housing market and to assist people as they progress through the property market. Consistent with the principle that tax should be proportionate to the ability to pay, the burden of taxation should fall on each according to their ability.

“Tax rates should also be designed to support the Scottish market. The average house price in Scotland is £170,000. The average detached house is around £244,000. In contrast the average house price in London is £510,000.”

Share The News Tweet about this on TwitterShare on FacebookShare on Google+Email this to someoneShare on LinkedIn





Leave a Reply

Your email address will not be published. Required fields are marked as *

*