Extra property tax but who will pay eventually?

Extra property tax but who will pay eventually?

January 29 2016

The Scottish Government proposes to introduce a significant new property transaction tax of 3% on purchases of residential property where the buyer already owns a residential property.

Effectively this tax on anyone buying a second home or a property perhaps to let out.   The charge is likely to come into force on the 1st of April this year. 

Deputy First Minister John Swinney said the change in legislation was intended to help first time buyers.   Mr Swinney said “our priority is to make sure that first time buyers have the greatest possible chance to get a foot on the property ladder”

The move was met with a mixed reception.  The Chartered Institute of Housing Scotland welcomed the new tax.  Spokesman Ashley Campbell said “We welcome proposals to increase land and buildings tax for second homes and buy to let properties”.

On the other hand John Blackwood chief executive of the Scottish Association of Landlords was scathing about the new proposals.   He said “The supplementary tax on the purchase of second homes will have a huge impact on the buy- to- let market and exacerbate an already serious shortage of properties in many areas.”

The new tax certainly is quite significant – kicking in as it does for all properties over £40,000 in value – which pretty well means every property.   That means anyone buying a second property of £145,000 or over will pay a minimum m 5% tax with the rates going up at higher prices.   So the cost of buying second homes is going to be  hefty from April.

David Borrowman of Caesar and Howie comments “Mr Swinney suggests this measure is to help first time buyers.  I really don’t want to get into politics but I cannot agree with that suggestion – this is a revenue raising exercise pure and simple.  The Scottish Government failed to make the targets it set itself with the new Land and Buildings Transaction Tax - and this is a way of raking in more revenue.  Housing markets work best when buyers and sellers at any price level can complete transactions at reasonable costs – anything which artificially puts up these costs doesn’t help the market or anyone involved in it, or reliant on it.     Personally I think “buy to letters” will probably still buy in reasonable volume,  and  the losers here will be tenants in the private sector – with landlords putting up rents to recover these extra costs” 

 


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