Changes to Stamp Duty Tax in Scotland
The announcement that the Conservative government was considering a reduction in stamp duty to boost the housing market (and their own fortunes in the forthcoming general election) was a welcome attempt to lift a sector which is showing some signs of flagging.
The property market south of the Border seems to have been badly hit by interest rate rises and the rising cost of living driven by soaring inflation. Any support for the market would be welcomed by homebuyers in England and Wales struggling to afford the costs of moving.
In Scotland the housing market has fared better, but it is clear that prices here are going to soften in the coming months, the market will become more difficult, and the sector is facing a slowdown.
Whilst it is obvious that the proposal to reduce stamp duty in England is politically motivated it actually makes sense in introducing a policy which aims to address the issue of a slowing market. England, in particular, has experienced a quite substantial dip in sales volumes over the last year dropping 42% between July 2022 and June 2023.
The housing market in Scotland has not been impacted nearly so much with sales volumes dropping just 4% over the same period but it is undeniable that the market cannot remain buoyant forever. Therefore, a policy which makes it cheaper to buy a home would provide immediate and beneficial support for homebuyers enabling them to cut their expenses.
But it is obvious that any cut to stamp duty elsewhere in the country would need to have a commensurate reduction in Scotland if the housing sector here is to compete on a level playing field.
Scottish homeowners are already hit with much more punitive taxes when buying property so any action which exacerbated this further could prove disastrous for the housing sector.
Therefore, any reduction in stamp duty in England and Wales would have to be replicated in Scotland to avoid a widening of the tax burden for homebuyers north of the border compared to their English counterparts.
Higher tax rates in Scotland are often justified on the principle that the richest should pay the most. But most people would question whether someone who can afford to buy a property for £325,001 is really among the wealthiest in our society.
The reality is that, rather than being a charge on those with the broadest shoulders the existing LBTT hits many ordinary working people. While some may think that if you can afford to buy a house worth more than £325,001 you can afford to pay more tax. The truth is that a home at this price is not the preserve of the rich but instead that of the many Scots simply working to provide a home for themselves and their families.
The people buying these homes are the backbone of the workforce such as nurses, teachers, office workers, police officers, and others who are being asked to pay substantially more in property tax than their English counterparts. If these people vote with their feet and decide that moving to Scotland to work is prohibitively expensive, then we may experience serious labour shortages in key sectors in the coming years.
We need to encourage more people to come to work and live in Scotland rather than discourage them with much higher taxes, greater house price expenses, and a more expensive cost of living. It is essential that if stamp duty is reduced in England and Wales that it is immediately matched in Scotland to ensure we have a fairer, more realistic approach to taxation which doesn’t punish ordinary Scots for wanting to work and live their lives here.