The boss of a 117-year-old property firm in Scotland has come out swinging against the Land and Buildings Transaction Tax, which replaced SDLT north of the wall in April 2015.
LBTT was pronounced “an operation success” by the authorities, but Carl Warden of Perthshire-based Bell Ingram argues that Ministers have “got it wrong”, and that changes must be made to avoid further crippling the housing market.
Revenues are falling short of targets, says Warden, and the property market above £325,000 – especially for large rural properties – has been “stunted” as the cost of moving becomes prohibitive.
While the sliding structure of LBTT is similar to England’s SDLT, the rates are rather different: once the 10% LBTT bracket for properties costing £325,000 to £750,000 is reached, the Scottish tax quickly escalates compared to the rest of the UK – which, as we know, is already painful at the top end. A property costing £350,000, for example, will result in £8,350 LBTT compared to £7,500 SDLT. A £1m property, meanwhile, would be subject to £78,350 in LBTT, compared to £43,750 SDLT – a 179% increase comparison.
Carl Warden, Senior Associate at Bell Ingram: “This is not a time for the Scottish Government to be proud. LBTT is clearly not working, and now is the time to make a change and realise they got it wrong.
“When I meet people who are looking to buy, their jaws hit the floor when they start to appreciate the scale of how much tax they have to pay.
“Transactions attracting this level of tax are making people do one of two things; either not move at all, or negotiate hard on the asking price based on the vendor reducing their price by the level of tax due.
“It is important to highlight that this is not just an issue for people at the higher end of the property market. If sales stop it – or prices are curbed – it ripples down the property ladder; putting further pressure on first time buyers.
“To show just how big the gap is becoming between the Scottish tax and that of the rest of the UK, we recently sold a property at £1.15m for which the LBTT was £96,350, compared to stamp duty at only £58,750 – that’s a £37,600 difference.
“This transaction also attracted an additional 3% second home tax of £34,500, which was a grand total of an eye watering £130,850 in purchase taxes.”