LBTT could be reviewed
‘Stifling’ property tax may change says Mackay
Finance Secretary Derek Mackay has said he will review the land and buildings transaction tax which has also fallen millions of pounds short of the revenue targets it set.
LBTT was introduced in 2015 after powers over stamp duty were devolved, making it the first domestic tax levied in Scotland since the Act of Union.
However, official figures show property transactions in the top half of the housing market have fallen sharply, despite Mr Mackay telling Daily Business last month that there was no evidence of any change.
The Scottish government has consistently insisted that the bands were fixed to reflect different market conditions and valuations in Scotland compared to higher priced areas of the UK.
However, some areas such as Edinburgh, have seen a slump in sales of properties at the higher end of the market.
According to property sources LBTT is now expected to raise £800 million less than forecast over the life of the current parliament.
Property purchasers are charged a percentage based on sale value, beginning at £145,000. The levy is 2% on purchases between £145,000 and £250,000; 5% between £250,000 and £325,000; 10% between £325,000 and £750,000; and 12% on properties costing more than £750,000.
LBTT has had a disproportionate impact on the housing market in Edinburgh, where average family house prices in parts of the capital can exceed £325,000.
In England, where the 5% rates applies to all sale values up to £950,000. A property bought for £400,000 in Scotland would incur a tax bill of £13,350 – a third more than it would cost to buy a home of the same value in England.
Mr Mackay has said he may look at raising the higher bands, easing the tax burden on thousands of homebuyers in the middle market. If the change is carried out, it could provide an average saving of £9,000 to affected buyers
Mr Mackay told a Sunday newspaper: “I’m not an ideologue on this issue. We want the tax to function well and if there’s a case that an amendment of the current bands could help stimulate the housing market in that range, and the revenue it raises, then I will consider it.”
He added: “It’s early days. It’s normal to review policies.”
Scottish Conservative finance spokesman Murdo Fraser said: “If Derek Mackay does perform a u-turn on LBTT rates it will be well overdue.
“For months now experts have told us that the high rates set by the SNP were stifling the market and leading to a drop off in sales.
“With revenue projected to be down hundreds of millions of pounds from what was expected, it’s clear that the Finance Minister has made a huge error of judgment.”