Scottish Government revises property sale bands
JOHN Swinney has revised the bands and rates of his Stamp Duty replacement tax little over three months after he proposed it.
The Finance Secretary was accused of the “fastest U-turn in history” when he announced the changes to his Land and Buildings Transaction Tax. (LBTT).
The LBTT had been criticised for hitting house-buyers looking to purchase mid and high market homes.
Mr Swinney was forced to move after the LBTT was undercut by George Osborne’s Stamp Duty reforms unveiled in the Chancellor’s Autumn Statement in December.
Osborne’s immediate introduction of dramatic Stamp Duty cuts had led to fears that the Scottish property market would be destabilised.
Estate agents had predicted a rush of buyers over the coming weeks as house-buyers attempted to take advantage of the preferential UK Government rates before the introduction of Mr Swinney’s tax in April.
The new LBTT arrangements will see Scottish house-buyers pay no tax on properties up to £145,000 - a move that increases the no tax threshold by £10,000 from the original LBTT proposal of £135,000.
For properties worth between £145,001 and £250,000 buyers will pay two per cent on the proportion of the price above the £145,001 threshold.
Following complaints that LBTT was a “tax on aspiration” for those seeking to buy larger homes, Mr Swinney has created a new band for properties worth between £250,001 to £325,000.
In that band, the new LBTT rate will be five per cent, as opposed to the 10 per cent that property buyers would have had to pay if the original arrangements had remained in place.
Mr Swinney’s original plan, unveiled in October, had been to tax properties worth between £250,000 and £1 million at 10 per cent.
His revised plan will now see properties in the £325,001 to £750,000 band taxed at 10 per cent.
While those worth £750,001 and over will be taxed at 12 per cent - ensuring that those aspiring to the upper end of the property market will be forced to pay more.
Previously Mr Swinney had envisaged that it should be properties over £1 million that would be in the 12 per cent rate.
Mr Swinney said 99.9 per cent of residential transactions would pay less LBTT or no LBTT at all, when compared with the bands and rates originally proposed in October. Only those buying a home for more than £945,000 will pay more in tax under the new plans.
But at Holyrood, Labour’s finance spokeswoman Jackie Baillie described the move as the “fastest U-turn in history”.
But when compared with Mr Osborne’s reforms, the new proposals willsee those buying a property for over £330,000 pay more tax than south of the border.
The UK Government’s Stamp Duty reforms will see house-buyers south of the border pay zero tax on homes worth up to £125,000.
Two per cent will continue to be paid on homes in the £125,001 to £250,000 bracket. Five per cent is paid on homes worth between £250,001 and £925,000. The 10 per cent rate does not kick-in until a property is worth between £925,000 and £1.5 million. Twelve per cent
is paid on properties worth over £1.5 million.