The Scottish National Party (SNP) is coming under intense pressure to reduce the burden on middle market property transactions after the introduction of the Land and Buildings Transaction Tax (LBTT) which replaces the previous stamp duty arrangement. We covered this particular topic just a few weeks ago with many experts warning the jump in tax rates was too severe and would hit middle market transactions where costs were still of material concern.
The particular area of the market under pressure will concern properties valued between £325,000 and £500,000. The new tax rate has seen a jump from 2% under the old stamp duty system up to a mind boggling 10%. So, should the SNP listen to the experts or will this system create more income at the expense of the so-called middle classes?
Creating a logjam
One of the main concerns is that this enormous jump in taxation will deter many families in areas such as Edinburgh, Aberdeen and East Renfrewshire who may have been looking to acquire larger properties. These particular areas are some of the more affluent areas of Scotland although when you bear in mind the austerity measures sweeping across the country, is it really sensible to increase property taxation from 2% up to 10% overnight?
Quote from PropertyForum.com: “Will the SNP ruin the Scottish property market?“
It may well be that eventually those looking to acquire larger properties will come to terms with the increased taxation or should the SNP look to reduce the rate to a more acceptable 5% up to 7%?
Fewer transactions and reduced income
Respected estate agents Savills has already suggested that the introduction of this new property tax will hit sales numbers in the short-term and take the market back to transaction levels seen in 2011. However, perhaps the most important element of this prediction by Savills is that there will be a loss of taxation income which will hit £6 million!
A potential loss of this amount would put the SNP in a very difficult situation, do they admit that the introduction of the new tax was wrong or do they increase the rate for larger more expensive properties? As we all know, politicians often find it very difficult to admit they were wrong and an increase in rates would have an even greater material impact on the sector going forward. It is becoming more and more obvious that the SNP failed to recognise a change in attitude and actions from would be property buyers following the introduction of their new tax.
Has this whole taxation episode backfired on the SNP?
It is becoming a popular political theme to bash the so-called rich/middle classes as and when funding is required. Austerity measures are sweeping across the UK, impacting all families from all income brackets but for some reason the SNP, and other political parties throughout the UK, see the property market as something of a cash cow. However, the introduction of this new tax may be one step too far for many would-be property buyers in Scotland and the SNP could end up with a serious amount of egg on its face!