Scotland faces a property exodus if Boris Johnson’s proposals for stamp duty come into place in the rest of the UK according to a leading property management company. Apropos by DJ Alexander believe that Johnson’s proposal, which is suggested would remove all stamp duty land tax (SDLT) for properties valued below £500,000 would prove disastrous for the Scottish property market. The proposal is aimed at injecting some life into the flagging London property sector but would open up an enormous disparity in taxation between Scotland and the rest of the UK.
In Scotland home buyers already pay more in property taxes due to the devolved land and buildings transaction tax (LBTT) which means that Scots pay £3,350 more than their UK counterparts for a £400,000 home and £8,350 more for a property costing £500,000. The Johnson proposal would substantially exacerbate this difference.
David Alexander, joint managing director of Apropos by DJ Alexander Ltd, explained: “There is already a financial disparity between the Scottish and UK property markets with markedly higher levels of tax charged on homes north of the border valued at £330,000 upwards. If Boris Johnson’s proposal came into force it would mean that homebuyers in Scotland would be paying £4,600 in LBTT for a £300,000 home and £13,350 in tax for a £400,000 property while people in England paid nothing.”
“This idea, in conjunction with Mr Johnson’s proposals for raising the higher rate personal tax threshold to £80,000 would disproportionately punish Scots income and their house buying costs. The tax threshold changes would result in Scots earning £80,000 paying £7,844.07 more in tax per year which in, itself might be a disincentive to move to Scotland. With property taxes also substantially higher this could result in severe difficulties in attracting individuals and investment to Scotland.”
David continued: “For second homeowners, landlords and property investors the picture is even bleaker north of the Border. A £200,000 second property in Scotland would cost the purchaser £9,100 in tax compared to £6,000 in the rest of the UK if the Johnson proposal is implemented. At £400,000 the difference is £28,350 more in Scotland while those able to afford to buy a one million-pound second home would find themselves paying £118,350 (just under 12% charge on second home ownership) in LBTT.”
“If this proposal is introduced early in the expected Johnson prime ministership there would be an immediate end to property investment in Scotland. Why would anyone want to pay so much in taxes when in another part of the UK they would be charged so much less? Under these proposals, investors, second homeowners, and landlords would find everywhere but Scotland a much more attractive place to invest in and would take their money elsewhere. Equally, attracting and keeping wealthy individuals in Scotland will become much more difficult given the higher personal taxes and the very high cost of property purchase.”
David concluded: “The danger of these kind of proposals is that they produce unintended consequences which could have a substantial and disastrous impact on another part of the country. The Scottish government’s existing higher personal tax regime (Scots start to pay higher rates of income tax on all earnings above £26,993) coupled with the devolved greater charges on property transactions is already having an impact but the Johnson proposal would simply accelerate this financial divergence and make Scotland a much more difficult and costly place to live and invest.”