Shift of position
Home buyers benefit as Forbes concedes LBTT cut
Kate Forbes: ‘I have listened to calls’
Scottish Finance Secretary Kate Forbes unveiled a cut in the cost of buying a home just two days after the government ruled out such a move.
Ms Forbes told MSPs she was raising the threshold for paying land and buildings transaction tax from £145,000 to £250,000,.
But she came under new pressure not to delay implementing cut in tax, or risk stagnating the market.
Her move follows Chancellor Rishi Sunak’s decision to raise the threshold of stamp duty land tax in England and Northern Ireland.
The Scottish government had indicated earlier this week that “there are no plans to reduce LBTT”. Already half of all buyers pay no tax.
However, Ms Forbes said today that raising the threshold would now mean eight in ten would not pay the tax. The new rate will be introduced “as soon as possible”.
Cut should stimulate market
“We continue to focus support on first‑time buyers and in assisting people as they progress through the property market,” said told parliament.
“I have listened to calls for me to raise the starting threshold to LBTT to help stimulate housing market activity and the economy. It is important that any change made in Scotland is focused directly on the particular needs of the Scottish economy.
“Today I can announce that I will increase the starting threshold for residential LBTT from £145,000 to £250,000. Because of the time required to prepare legislation, and for Revenue Scotland to be ready to collect and manage the tax, the change will not come into force immediately.
“But I will work to enable this to be introduced as soon as possible.”
The rates for the Additional Dwelling Supplement and non-residential LBTT remain unchanged.
All home movers purchasing a property above £250,000 will be £2,100 better off.
Ms Forbes said she was “also heeding the warning from the Institute of Fiscal Studies that “[first-time buyers] are a group that might actually be made worse off by the policy”.
The Chartered Institute of Taxation has also warned that a cut may not benefit first time buyers.
“There is still some uncertainty over who gains from a change of this kind,” said Joanne Walker, CIOT Scottish technical officer.
“A 2011 UK government study found that previous cuts to help first-time buyers were mostly absorbed in a higher house price, benefiting sellers rather than purchasers.”
Ms Walker said that once implemented, the changes will mean that an additional 34% of transactions will be taken out of LBTT, taking the total to 79%.
She joined others saying that a delay in introducing the tax would only stagnate the market as buyers would wait for the cut to be implemented.
David Alexander: threat of stagnation
David Alexander, joint managing director of property management firm apropos, said: “The result of this delay will be complete stagnation in the housing market until buyers know the date that the new threshold will begin.”
Homes for Scotland director of policy Fionna Kell said getting an early date for implementation of the LBTT cut is “absolutely vital” in order to avoid an “already fragile market recovery stall” as buyers delay purchases.
Ms Forbes is providing an additional £50 million this financial year to directly support First Time buyers with their deposits, recycling underspend in the Scottish Government’s financial transactions budget.
That will support an estimated additional 2,000 first time buyer purchases and lifts the total funding for this targeted measure to £200 million.
Liz Cameron, chief executive of the Scottish Chambers of Commerce said that raising the threshold “will not only boost the housing market it will also support the construction industry, both of which are essential to addressing Scotland’s chronic housing shortage.
“We ask that this should be urgently fast tracked to prevent distortion in the marketplace.”
Simon Brown, partner at Galbraith, said: “Raising the starting threshold for LBTT is a welcome move from the Scottish Government.
“Whilst we would have liked to have seen changes at every level of LBTT, we hope by increasing sales in this segment of the market that a catalyst can be provided to transactions even beyond the £250,000 mark.
“It is vital that Scotland continues to benefit from a healthy property market at the top end and it will be important to monitor activity over future months to ensure we are not being left behind compared to south of the border.”
The change has to come in immediately if it’s to have any positive impact– Graham Simpson. Conservative shadow housing minister
Scottish Conservative shadow housing minister Graham Simpson said: “It’s somewhat welcome that Kate Forbes has listened to our demand for action on LBTT.
“But the change has to come in immediately if it’s to have any positive impact.
“Scheduling this move for months down the line will grind the housing market to a standstill and do more harm than good.
“A number of trades rely on people moving home to carry out work, improvements and renovations, and they need this decision to happen now.
“The SNP needs to spend less time inventing grievance and more time implementing changes which will benefit the lives of thousands of hardworking families.”