Widening property tax gap between Scotland and England will hit the housing market - David Alexander

25th Apr 2024
Widening property tax gap between Scotland and England will hit the housing market - David Alexander - D. J. Alexander

The people we need to maintain productivity and growth could be put off moving to Scotland, warns David Alexander.

It is clear that housing is going to play a prominent part in the forthcoming general election. Owning or renting a home has become much more difficult for many people and any offering which provides some relief is likely to go down well with voters.

The news at the weekend that the Conservatives were considering increasing the threshold for stamp duty land tax (SDLT) in England and Wales from £250,000 to £300,000 before any tax is due is a clear attempt to woo struggling house buyers. Coupled with anticipated falling interest rates this financial boost in the Autumn statement would present a significant saving of around £2,500 for each homebuyer.

With the average price of houses in all areas outside London falling below £300,000 this would mean that hundreds of thousands of homebuyers would pay no stamp duty.

The expected feelgood factor of lower purchase costs and reduced monthly payments would provide a significant boost for the English market at a time when it appears to be faltering.

However, if this change comes into force, then it would only widen the already enormous gap between Scottish homebuyers who pay land and buildings transaction tax (LBTT) and their counterparts south of the border.

The discrepancies in charging between the two parts of the UK start with first-time buyers who pay tax in Scotland from £175,000 whereas this does not happen until £425,000 in England.

In Scotland a rate of 2 per cent LBTT is paid on all property purchases between £145,001 and £250,000, then 5 per cent between £250,0001 and £325,000, and 10 per cent beyond that up to £750,000.

In England and Wales if the threshold is changed to £300,000 then 5 per cent would be paid on all purchases beyond that up to £925,000, with a 10 per cent rate kicking in beyond that.

This means that Scots buying a £300,000 home would pay £4,600 while their neighbours in England would pay nothing. This growing chasm between the treatment of Scottish homebuyers cannot be anything but detrimental to the housing market.

The property taxes that Scots are already being charged simply for wanting to own a home are ludicrous, yet property owners are seen as an easy source of cash. The argument that only those with the broadest shoulders are being charged more in taxes wears a bit thin when this includes first-time buyers and people buying properties worth £145,001 and more.

With the average price of a home in Scotland at £187,807 it would seem that almost everybody is paying tax on their property purchase.

The concern is that this level of taxation could start to put people off moving to Scotland for work or to retire. We desperately need a growing population to maintain productivity and economic expansion, yet higher personal and property tax charges are not particularly welcoming.

All property taxes are a cash grab but increasingly this looks more desperate, more punitive, and more harmful the wider the tax difference becomes. With a personal tax policy which means that Scots earing £28,000 pay higher personal tax and a property tax which applies to almost everyone who buys a home it seems that everyone in Scotland has the broadest shoulders now.

David Alexander is CEO of DJ Alexander Scotland Ltd