Earlier this year the government suggested it may reconsider the Land and Buildings Transaction Tax, its controversial replacement for Stamp Duty. Despite claims of fairness and help for families on the lower rungs of the property ladder, the tax has failed to raise as much revenue as expected. Official figures show that the tax is expected to raise £800 million less than forecast – a figure that has raised a few eyebrows among property experts.
One property expert had some fairly sharp recommendations for finance secretary Derek Mackay in a recent newspaper article. These included:
1. Raising the threshold of LBTT on all transactions above £350,000, which is when LBTT becomes more expensive than stamp duty. This would save house-hunters in the middle of the market thousands of pounds.
2. The rate of LBTT should peak at transactions of £1 million, bringing prices more in line with England and Wales. LBBT on a £1 million sale is currently £78,350, compared to £43,750 in England and Wales. Taxation, suggests Alexander, leaves nothing left for refurbishment, so buyers are reluctant to move. This has stagnated the top end of the market which has implications all the way down. Rather than being merely a concession to the rich, reducing tax on the highest value properties should stimulate the entire market.
3. Those downsizing in later life should be given tax concessions. For example, a couple moving from a large family home to a smaller flat will pay a large tax bill which could impact on their retirement funds. Giving concessions would lead to more transactions on larger family homes and hence more money in tax take.
4. The need to create a sense of equilibrium north and south of the border. Nobody wants Scotland to be given the cold shoulder when it comes to investment in property. Why buy in Scotland when the tax is prohibitive?
How does LBTT work?
Here’s a refresher on LBTT. Homebuyers are charged a percentage on sale value, starting from £145,000. The levy is 2% on purchases between £145,000 and £250,000; 5% between £250,000 and £325,000; 10% between £325,000 and £750,000; and 12% on properties costing more than £750,000.