Property tax cut announcement creates ‘dangerous uncertainty’ in the housing market
Solicitor Estate agents have accused the Scottish Government of creating dangerous uncertainty in the housing market by announcing a proposed change to the property tax threshold without stating when it will be introduced.
Kate Forbes, Scotland’s Finance Secretary, said the Land and Buildings Transaction Tax (LBTT) threshold was to be raised from £145,000 to £250,000, but she failed to say when the change would come into effect. Time need to be allowed for putting systems and legislation in place- not something that will happen overnight unless they had planned ahead for this.
Ministers are working with Revenue Scotland and others to ensure the change can be introduced as quickly as possible. It will remain in force until 31 March, 2021.
The move shadows an announcement on Wednesday by Chancellor Rishi Sunak of a cut in the Stamp Duty Land Tax (SDLT) for England and Northern Ireland to prevent a slump in the property market following the coronavirus lockdown, raising the threshold from £125,000 to £500,000. That came into effect immediately unlike what has been announced here.
Struan Douglas, managing director of Edinburgh-based solicitors and estate agent Purdie & Co, said it was ‘extremely disappointing to introduce such a change in Scotland without a timescale, creating dangerous uncertainty’.
“Whilst ultimately of benefit to buyers there are deep concerns in the industry about the impact this will have on market activity in the short term. The property market in Scotland has barely re-opened and the last thing we need is this announcement which is likely to put the brakes on a large number of transactions which were only allowed to restart last week- many of which where the moves were on hold for months during lockdown.
“Announcing a cut in tax at some unspecified point in the future can do nothing but invite potential buyers to delay home purchases and this will surely lead to the market stalling further after a 3-month spell with little activity. Any buyers in their right mind who were not already bound to complete under concluded missives and who were due to complete in coming weeks will now try to hold off doing so if they stand to benefit by up to £2,100- is that fair on the sellers who have been waiting for months for the sale to happen? Surely with some forward-planning ahead of the likely announcement by Rishi Sunak this could have been prevented this. In any case, making an announcement of this nature at this vital time for the property market lacked foresight, particularly when there had been warnings to Rishi Sunak before his announcement that it would be detrimental to the market if not brought in immediately.”
The effect of the change is that residential property transactions where the purchase price is under £250,000 and to which the Additional Dwelling Supplement (ADS) does not apply, will attract no LBTT. For transactions where the purchase price is above £250,000, the rates and thresholds that usually apply remain unchanged.
Where the ADS does apply, the change to the starting threshold will also apply to such transactions. This means that a residential property transaction that is liable to the ADS will not pay the standard rates of LBTT on the first £250,000 of the purchase; however, the ADS will remain payable at 4% of the total purchase price.
The Finance Secretary also confirmed that the Scottish Government would invest an additional £50 million into the First Home Fund to provide additional support to first time buyers at this time.
Kindly shared by Purdie & Co