Scottish Property Tax Changes - Make Sure You Know Where You Stand

For anyone buying and selling a property in Scotland, the sweeping changes to Stamp Duty will have brought a mixture of confusion, relief and panic.

For the next few months, the transformation of the Stamp Duty system will impact on every property transaction – so as Edinburgh’s top estate agent we wanted to create an easy to follow guide which will provide solid advice relevant to your budget.

In a well-documented shock move, Chancellor George Osborne used his Autumn Statement as his chance to stamp down on Stamp Duty. But as many people in Scotland have commented, he pinched these ‘innovative’ ideas from up here.

In Scotland we were already anticipating a raft of changes effective from April 1^st 2015 as Stamp Duty is to be replaced with the new Land and Building Transaction Tax (LBTT).

Quite rightly, John Swinney noted the irregularities in the old system which created a huge jump in tax payable when the next bracket or tier was reached - and sought to resolve this.

We are fully supportive of the changes as the new regime will help those purchasing lower priced properties and encourage growth in the housing market.

The existing stamp duty system was very unfair in that there were sudden jumps at the bands. The new rates illustrate a much fairer approach and the principle behind them looks genuine, rather than politically motivated.  

To illustrate, previously, buyer A could pay £250,000 for a house and pay £2500 stamp duty but buyer B could pay £250,001 and be hit with a £7,500 levy.

It was just as people were beginning to get their heads round this impending change that Mr Osborne threw this curve ball, similarly banishing the old style ‘step’ system for the whole of the UK.

This leaves us up here with the unprecedented situation of two major changes to property taxation in just a four month period!

That there are many confused people out there is quite understandable – but here at Warners we would like to alleviate that by breaking down the jargon and providing clear advice.

Since Mr Osborne’s plans came into effect on December 3, all home buyers paying up to £937,000 have benefited from a reduced payment, with the lower end of the market benefitting proportionally more.

So you are probably now wondering – should I be looking to move home now, or should I be holding off until April and the introduction of LBTT?

Accusations have already been levied at Mr Swinney accusing him of ‘squeezing the middle,’ As it is perhaps this upper-middle that will be hit hardest as of April. But this is a broad assumption, which takes for granted that those at the very top end (£1m+) are less affected by the proportionally higher increases.

The real ‘tipping point’ is between £250k and £260k. Buyers looking at buying a property up to £250k will pay less tax after April 1^st, and those paying £260k+ will pay more.  In some areas there will be significantly increased costs if buying after 1 April. For example, if I buy a home on 31 March for £500,000 I’ll pay £15,000 stamp. If I buy the same home on 1 April then I’ll pay £27,300 LBTT – a big difference. It’s vital therefore to take correct advice and ask the questions about the differences depending on your completion date.

So amidst all the confusion and change the figures make it clear. Mr Swinney’s plans are more lenient on the bottom end of the market, and come down harder on the higher end.

We will all need to see how this shakes down. Will it have an impact on sales? Will we see a mad rush pre April, then a lull?

What is true, and what has been true for decades, is that people move home because they need to – such as growing families, job move, divorce – and so the Stamp Duty or LLBT payment becomes irrelevant and gets treated as another – albeit unwelcome – property cost.

Remember also, the Home Report is designed to give us a marker on value and to dissuade excessive price growth. So even if demand pre April sparks a spike in prices, we believe this should continue to moderate and sustained.

At Warners we will gladly advise you on the best course of action through the Stamp Duty maze – if your are a buyer or seller. We will provide expert fair advice, taken from our position as the ESPC’s number one performing firm every year since 1999, selling more homes in Edinburgh, Fife and the Lothians than any other estate agency.