It’s past time for a rethink of punitive property taxes

There must come a point at which the housebuyer’s ability to pay more tax to by a property ​​becomes untenable, writes David J Alexander.

It is rare to get MPs from all parties to agree on anything. Yet this is what recently happened when the cross-party members of the Housing, Community and Local Government Committee (HCLG) called for reform of stamp duty as it was “damaging the economy”. They stated that stamp duty “slowed the property market and ultimately damages the economy”.

This is what many of us have thought for years. Of course, the committee was talking about property in England but there is little doubt that our own Land and buildings Transaction (LBTT) is doing similar damage to the housing market in Scotland.

When LBTT was introduced in April 2015 it raised £201.9 million in its first year. Additional Dwelling Supplement (ADS) wasn’t introduced until April 2016, and the first year’s returns were £76.1m.

The latest 12-month period from June 2025 to May 2026 revealed that LBTT raised £756.6m – over half a billion pounds more in 11 years – and of that £230m was from ADS, which is a 300 per cent increase in a decade.

The number of buyers not paying any LBTT in 2015 was 52.4 per cent but by May 2026 this number had dropped to 30.2 per cent, meaning 69.8 per cent of all buyers now pay a levy for simply buying a home.

The tax is also more punitive for Scottish first-time buyers (FTBs) as LBTT starts at prices over £145,000 whereas in England and Wales stamp duty doesn’t begin until a property costs more than £300,000.

Almost all the residential taxes raised come from properties sold for more than £325,001 when a 10 per cent levy is imposed. The 21,090 transactions above this threshold collected £439.1m, which is 83.4 per cent of the total £526.6m raised in LBTT (this is the figure for residential sales with the ADS figures removed). This means that the average tax levied per homebuyer was £20,820.

All governments love property taxes because – let’s be honest – they are a good earner. But there must come a point at which homebuyers’ ability to pay more tax for simply purchasing a property becomes untenable. The call by the HCLG committee for a review is a sensible one and reflects an understanding that the housing market is integral to the health of the economy, but that punitively taxing home buying has a detrimental impact in the long term.

In Scotland, the idea that those being charged the ADS in Scotland will simply continue to pay more must surely be coming to an end as this has made affordability a key issue for second-home buyers and property investors. What is often forgotten by politicians is that this group always have the option of buying property elsewhere or of investing in another asset. Excessive taxation will drive buyers away and result in lower revenues in the future.

There is clearly an urgent need to review property taxes in general. Without a clear idea of how taxes intervene and impact on the housing sector the assumption that revenues will continue to rise regardless of the level of taxation is incoherent and simplistic. A system which encourages homebuying, property investment, and housebuilding is urgently required if the current housing emergency is to begin to be addressed.