Exclusive: Housing dilemma
Sunak stamp duty call may force Forbes into u-turn
Kate Forbes: plans to end LBTT relief
Scottish Finance Secretary Kate Forbes could be forced into another u-turn if the Chancellor extends the relief on stamp duty to help the housing market in England.
Ms Forbes announced in Thursday’s Scottish Budget that most of the thresholds on land and buildings transaction tax – Scotland’s version of stamp duty – will return to pre-pandemic levels from 1 April.
However, some UK ministers are questioning the wisdom of slamming the brakes on the housing market, which is a key driver of economic growth and are putting pressure on Rishi Sunak to extend the end date for the homebuyers’ relief in England.
MPs will debate calls for a six-month extension of the tax cut on Monday. Tory Elliot Colburn, who will lead the debate, said a temporary extension was vital, if only to allow deals already in train to be completed.
An extension in England would force Ms Forbes to choose between continuing to penalise Scottish home buyers, or reversing her decision in order to stay close to the English market.
Mr Sunak slashed stamp duty in England last July, raising the threshold for paying the tax from £125,000 to £500,000 until 31 March.
In Scotland, Ms Forbes raised the starting threshold for LBTT for residential property transactions from £145,000 to £250,000 until the same date.
In Thursday’s Budget she resisted calls to extend the relief and instead reimposed the ceiling of the nil rate band for residential land and buildings transaction tax (LBTT) to £145,000 from 1 April. Only first-time buyers escaped, with the relief raised to £175,000.
Scottish property agents such as David Alexander said Ms Forbes “missed a trick” by not continuing with the higher thresholds, pointing to government figures which showed the government raised more revenue during the period.
He said that continuing with the relief would also help maintain the current high level of transactions in the market.
However, David Stone, head of economy and tax at the Scottish Fiscal Commission, told a post-Budget media briefing that he did not think a longer period of relief would make much difference to demand.
The housing market recovered quickly after the first lockdown as it experienced pent-up demand, he said.
“Relief ending will not have a significant effect because of the level it is set in Scotland,” he said.
“We are not expecting a big drop in activity.”
The latest developments follows the Scottish government’s to scrap the scheme aimed at helping buyers into affordable housing, which it has blamed on the Treasury.
The Scottish government has told house builders that funding cuts had “resulted in some difficult choices about how we use the allocation in 2021-22.”
It is now cutting its Help to Buy Affordable New Build scheme for this year and next year. The scheme has supported buyers with interest free equity loans worth up to 15% of the purchase price of a newly built home. The maximum price of any home bought using the fund is £200,000.
The scheme began in 2013 and was due to run until March 2022, but the deadline for any buyers hoping to take advantage has now been brought forward to next week.
There are no known plans for the English version of the Help to Buy scheme to be dropped, potentially creating further tension between the two governments. Help to Buy in England has been used by about 300,000 home buyers since 2013.
“This news will be an absolutely devastating blow for those members of the Scottish public who were looking to use these schemes to get on to or move up the property ladder,” said Nicola Barclay, chief executive of home building industry body Homes for Scotland.
“Coupled with the reduction in the affordable housing budget, this shock decision threatens to reverse the positive progress that has been made over recent years in addressing Scotland’s chronic undersupply of housing at a time when home has never been more important.”