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Scottish budget needs to help homebuyers

According to a leading property firm, this Thursday’s Scottish Budget needs to take action to help homebuyers. DJ Alexander LTD said that the Scottish Government had an opportunity to support homebuyers by establishing a fairer, more equitable tax on homebuying in Scotland.

Currently, the Land and Buildings Transaction Tax (LBTT) disproportionately charges a small number of buyers in Scotland much greater taxes than those in England.

Worryingly, the Scottish property and personal tax system increasingly depend on a small number of individuals to provide the bulk of income. Last month just 1,910 homebuyers paid 84.3% of all tax (excluding additional dwelling supplement (ADS)), totalling £42.3m out of a total of £50.2m collected.

Equally, the personal tax system in Scotland is similarly dependent on a very small number of people paying a disproportionately large contribution to revenues. From 2020 to 2021, despite there being only a small proportion (14.8%) of Scottish taxpayers who were higher or top-rate taxpayers, they were liable for 59.8% of all income tax in Scotland.

The latest figures also show that this higher level of taxation may be impacting the number of wealthier people who choose to live in Scotland, as there were 700 fewer top-rate taxpayers in the 2020 to 2021 period. With an estimated 20,000 people in Scotland above the £150,000 threshold for additional rate tax, this represents a 3.5% drop in the total number of wealthy contributors.

The risk is that the combination of the growing disparity of property and personal taxes could lead to more individuals and families deciding to leave Scotland because of the onerous financial burden of working and living in Scotland.

David Alexander, the chief executive officer of DJ Alexander Scotland, commented: “This week’s Scottish budget needs to cover a lot of ground without disproportionately targeting one group over another. Politicians always talk of fairness and that those with the broadest shoulders should bear the greatest burden. Still, we can see that taxes in Scotland increasingly target those who would not traditionally be regarded as wealthy.”

“In the property market, first-time buyers are punitively charged much earlier than their English counterparts. The tax starts at £175,000 compared to £425,000 in England and Wales. Equally, the higher property tax rate is charged from £325,001 in Scotland, while this rate isn’t achieved south of the border until properties are worth more than £925,000. In Scotland, for properties sold for more than £750,000, just 130 people paid £96,923 each on average, contributing £12.6m, equivalent to over a quarter (25.1%) of all tax raised in one month.”

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