In yesterday’s Budget, John Swinney, finance minister for Scotland, matched the move made by Chancellor George Osborne in his Autumn Statement and introduced a 3% surcharge on Land and Building Transaction Tax (LBTT, Scotland’s equivalent to stamp duty) for purchases of second homes and buy-to-let property.
Swinney’s controversial Budget included the move to introduce the extra charge of 3% of the purchase price above £40,000 from 1 April 2016. The new surcharge caused a mixed reaction across the property industry north of the border.
Will Banham, an associate at land and property agent Bell Ingram’s Oban office, says: “The second-homes sector is a crucial part of the property market across much of rural Scotland. In fact, it has been a significant factor in supporting property value and transaction levels through the downturn. This is particularly true throughout the rural west coast and the islands where the holiday home market represents a good proportion of total transactions and is an important part of the rural economy.
“Traditionally holiday homes in Scotland have been regarded as representing very good value for money when compared with other parts of the UK. However, at the moment the market is fairly static, so an increased tax burden on second-home buyers will almost certainly force property values down and could have a chilling effect across the entire rural property market.”
Scott Brown, estate agency consultant at Warners Solicitors and Estate Agents, saw the move from a different angle: “The announcement today that there is to be a 3% rise in LBTT for people who buy second homes is hugely positive for first-time buyers in Scotland and it makes the market much more attractive for them.
“Most countries around Europe already have higher stamp duties for those buying second homes so it makes sense to have Scotland’s tax levels on par, not only with the rest of the UK, but going in tandem with the European market. If the tax levels had not been increased it would have made it much cheaper for investors from England and Wales looking for buy-to-lets in Scotland. This change means that the Scottish property market is open more for first-time buyers.
“As an example, if I buy my main home at £145k then LBTT is zero. However, if I buy a second home at £145k then I pay the 3% surcharge on the whole price – so I’d pay £4,350 tax. That helps the first-time buyer over the investor and we want to help people get on the property ladder if they want to.
“I hope that all the extra money generated from this, in addition to what has already been put aside, with be specifically allocated to building more affordable homes for people in Scotland.”
Swinney also pledged an extra £90m to fund new affordable homes in his Budget statement.
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