Not that this statement should put anyone off buying one; even though reading is becoming increasingly e-based through smartphones and tablets, it never feels quite as good as slowly turning the pages of a “proper” paper on that one morning of the week when most of us actually have time to absorb the full text beneath each headline.
However, to clarify my opening sentence, some stories should come with a warning, in particular those political “exclusives” relating to changes to personal and corporate taxation.
The papers were full of this a week past Sunday, the revelation being that the Chancellor of the Exchequer, Rishi Sunak, was considering abolishing stamp duty and replacing it with an annual property tax based on the value of each individual home. However I remain unconvinced that the Chancellor is preparing to announce such a move in his next Budget – or any time soon after that. This seemed to me to be one of those “feeler” stories that are increasingly common nowadays, i.e. float an idea and then get a measure of public reaction before actually deciding to take things further (or not as is often the case).
Now I realise that property taxation is a devolved matter which means Scotland has the power to go its own way on LBTT (our equivalent to stamp duty). However, while Boris Johnson has been regularly accused of being “one step behind” Nicola Sturgeon on overall Covid policy, it was actually Holyrood that followed Westminster’s lead in introducing an LBTT “holiday”, albeit at a much lower cut-off point than that which pertains south of the Border.
So if the Sunak proposal was to be made concrete at some time in the future it is quite possible the current Scottish Government would step into line (albeit with a few tweaks just to emphasise how different we are, of course). And if so, what effect would there be on the market here?
Broadly I would be in favour, especially if – as the Treasury seems to claim – an annual property tax instead of stamp duty would be revenue-neutral. Before the temporary tax holiday, LBTT kicked in on property transactions at £150,000 and above in Scotland with the outlay beginning to rise steeply above the £325,000 price level. But moving home is not always “upsizing” to a better standard of property and, therefore, a consumer choice which people do not necessarily have to make. Death, divorce, illness and injury, unemployment, all play a part. When people move for reasons such as this is it fair that they should be taxed while doing so?
Whether and how people should be taxed for “moving up” is also a matter for debate. It could be argued that those fortunate enough to afford to pay for a bigger and superior house and garden that is beyond their actual space requirements can also afford to pay tax on the transaction – just as they would if buying luxury consumer goods. Few would disagree but in Scotland the taxation rate is highly-prejudiced towards the upper-middle/top end of the market and often acts as a disincentive for individuals, couples and families with aspirations.
The end of LBTT (or even fairer rates of LBTT) would also discourage older home-owners with grown-up families to downsize, thus increasing the stock for younger people wishing to move in the opposite direction. This would especially add to the choice of top-end properties in and around Edinburgh and Glasgow which could not but help make Scotland attractive to inward investors and their families.
As already stated, such a scenario must remain, at least for the moment, speculative. However in principle it does seem not quite right that our national property tax so discriminates against those who move over those who remain.
David Alexander is managing director of DJ Alexander