Why John Swinney should beware the property tax tipping point

First Minister John Swinney has recently refused to rule out increases in Land and Buildings Transaction Tax (LBTT) (Scotland’s tax on property purchases) in the next Scottish Budget, which must have caused a shiver in the spines of Scotland’s homeowners. It is clear that Mr Swinney believes there is still more money to be made from homebuyers despite the growing financial divide across the different parts of the UK.

You can see his point when you find the latest annual revenues from LBTT raised £735.6 million between October 2024 to September 2025, which was a 19.9 per cent increase over the previous 12 months.

This is £2,015,342 collected from homebuyers for every day of the year and is £122.1m higher than the figure for the same period the previous year.

The figure for September 2025 alone was the highest ever total at £81.6m for a single month. This is more than double the figure of five years ago when £34.5m was collected.

The UK Collaborative Centre for Housing Evidence stated this year: “LBTT is an inefficient, complex tax that discriminates against landlords and works against the interests of a more functional housing system. As with many economists, we think it should be abolished and its revenue added to that to be collected by a reformed or replaced council tax.”

Evidence of this discrimination against landlords can be found in the very large sums being paid through the Additional Dwelling Supplement (ADS). Almost a third of the £735.6m collected – a total of £227.9m – comes from landlords and second-home buyers, which is evidence of just how crucial these groups are in maintaining high levels of taxable income for the Scottish Government. This is 30.9 per cent of the total collected and is £65.6m higher than the previous 12-month period.

But it is not just landlords and second homeowners who are paying a heavy price for buying a property in Scotland. Those defined as having “the broadest shoulders” which in Scotland means those buying a property costing more than £325,001, are also facing a heavy burden.

Almost all the residential taxes raised came from properties above this threshold, which is the level that a 10 per cent tax levy is imposed. The 20,240 transactions above this threshold collected £412.5m – 83 per cent of the total £507.7m raised in LBTT (this is the figure for residential sales with the ADS figures removed). This means that the average tax charged per transaction was £20,380.

There must come a tipping point when these extraordinarily high levels of tax are a blockage to house sales and cause the market to slow and potentially stagnate. There are already reports that many older homeowners are remaining in their current properties rather than downsize due to the punitive levels of taxation imposed by the LBTT.

Yet, there could be another way. The transformative impact of lowering property and personal taxes in Scotland could be extraordinary. If the tax position were more relaxed and equivalent to the rest of the UK, then this would create a market with major growth potential in the future.

However, until this happens then we must rely on the continued generosity of homeowners, property investors and landlords to financially support the Scottish Government by agreeing to pay these high levels of taxation.