Devolved governments in the UK have thrown up many anomalies throughout the coronavirus crisis, the latest of which is the disparity in “stamp duty holiday” rates between Scotland and England. There will likely be a considerable difference in the Stamp Duty Land Tax (SDLT) (England) and Land and Buildings Transaction Tax (LBTT) (Scotland) to be charged in the two nations.
The SNP is to follow Chancellor Sunak’s lead with a property stamp duty tax cut, but there’s a big difference in the way it’s to be applied: whereas no duty will be paid on purchases of up to £500,000 in England, in Scotland this “tax holiday” until March 31 next year in both nations will only apply up to £250,000 in Scotland.
According to Scottish property management firm, apropos, second home buyers, property investors and landlords will be persuaded to invest their money in England as the cost of buying in Scotland will result in a premium of up to £26,250 in tax on sales valued at £500,000.
Furthermore, Kate Forbes, the Scottish Finance Secretary, has been warned that the changes could “do more harm than good” if they were not brought in quickly, as otherwise home buyers will likely delay their purchases until they can take advantages of the tax concession.
Sean McGinness, of the accountancy firm Saffery Champness, told the Daily Telegraph that the Scottish Government “has not matched the bold increase” announced by Chancellor Sunak and that the upper end of the Scottish housing market was likely to be “dampened” by this disparity.
“Perhaps most importantly, though, the silence thus far on when the measures will actually take effect could have a paralysing effect. However attractive on paper, buyers are highly unlikely to follow through on any transactions until there is clarity,” Mr McGinness said.
In response Ms Forbes has said that the changes will come into force “as soon as possible” but time will be needed to change legislation and to allow Revenue Scotland to get ready for the change. Like in England, the changes will remain in place until March next year.
Graham Simpson, housing spokesman for the Scottish Conservatives, whilst welcoming the tax concession says he regrets the delay, stating that the system should come into force straight away.
“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,” Mr Simpson said.
But most importantly, the issue according to apropos is the disparity in the tax rates between the two nations, with a much more favourable stamp duty land tax (SDLT) rate reduction being available to second home buyers, landlords and property investors in England and Northern Ireland.
According to apropos, buying in Scotland will become far less attractive for investors and second home buyers than their England and Northern Irish counterparts. The result will very likely be that Scotland misses out on a substantial amount of property investment over the coming year to March 2021.
David Alexander, joint managing director of apropos told PropertyIndustryEye:
“These figures just show how great the property tax divide has become between Scotland and England. Anyone buying a property in Scotland that is not their main residence face paying taxes which are 2.75 times greater than south of the Border which, in a property sold at £500,000, amounts to £41,250 representing an 8.25% surcharge on the purchase price.
“Amounts like this will make second home buyers, landlords and property investors wary of investing in Scotland. With taxes this high why would you invest in Scotland over England and Northern Ireland?
“At a time when we need to ensure that Scotland is as welcoming as possible a policy of making it much more expensive to buy a holiday home here, or to invest in property, seems counter-productive at best, and potentially destructive at worst.”