December 19, 2024
Full article
When John Swinney introduced the LBTT with a six-month lead-in period, it was quickly established who would be the winners and losers and the time scales to beat those tax increases. In essence, those with property valued in excess of £325,000 were encouraged to get their properties on the market as the increases in stamp duty would lead to the overall cost of a purchase at that level increasing significantly. There appeared to be no incentive for anyone purchasing a property less than £325,000 and those buyers were motivated to wait until April 2015 before coming back into the market. George Osborne’s intervention has changed all of that!
George Osborne has thrown a curve ball with his introduction of a new Stamp Duty regime which takes immediate effect prior to the introduction the new LBTT. The old stamp duty system has now been scrapped in its entirety for a system that the UK government claims will be of benefit to 98% of house purchasers. This newly introduced system by the UK government will be a transitional system for those in Scotland until LBTT is introduced in April 2015.
What does the introduction of transitional SDLT mean for the market now?
For those wanting to buy a property there is now no need to wait until April 2015 to benefit from the tax reductions. Whilst there is a £10,000 disadvantage between the transitional system and the eventual LBTT at entry level, the benefits from the old regime are still significant. For those with more expensive properties, the picture is less rosy unless you concluded missives for the sale prior to 4 December 2014 – in which case you would have the choice of completing the transaction under either tax regime. The benefits of lower tax under the old system have now disappeared and it will be more expensive for those selling properties at a price point in excess of £254,000. If your property is worth more that £254,000 then it will be more expensive to buy your property from 1 April 2015. The difference can be marked. The transitional system does not tax higher end properties as much as the new LBTT tax but there are still significant increases from the old stamp duty regime.
What are the medium to long term effects of the Stamp duty change?
Stamp Duty is based upon the premise that tax should be payable on those properties that are higher than the average house price. The English system is skewed by property values in the south-east and especially London and those living in the north of England and Wales will clearly benefit from that. Historically, Scotland has had a lower average house price and is not so dramatically affected by the large cities where the volume of sales is significantly lower than the south-east. This therefore means that more tax will be payable for equivalent properties over £250,000 in Scotland than in the rest of the UK. Those that are likely to be affected in the Scottish market are those buying “family houses” in “hotspots” in our major cities. The people purchasing in this category are not necessarily “super rich” and the impact of LBTT has the potential to adversely impact on the recovery of the housing market in these areas. It has been suggested that the Scottish Government will require to monitor this as a downturn in these markets could reduce the level of LBTT collection and may not make the change revenue neutral as envisaged. Indeed it will be interesting to see whether any pressure is put on Mr Swinney to fall into line with the English system and introduce the middle tier 5% which would smooth out the apparent inequity.
The table below demonstrates the changes in the system:-
| PurchasePrice | Old SDLT | New SDLT | LBTT |
| 130,000 | 1,300 | 100 | 0 |
| 200,000 | 2,000 | 1,500 | 1,300 |
| 300,000 | 9,000 | 5,000 | 7,300 |
| 350,000 | 10,500 | 7,500 | 12,300 |
| 400,000 | 12,000 | 10,000 | 17,300 |
| 450,000 | 13,500 | 12,500 | 22,300 |
| 500,000 | 15,000 | 15,000 | 27,300 |
| 750,000 | 30,000 | 27,500 | 52,300 |
| 1,000,000 | 40,000 | 43,750 | 77,300 |
| 2,000,000 | 10,0000 | 153,750 | 197,300 |
If you would like to have a chat with our Jonathan Williams to discuss if the time is right to for you to move then he would me delighted to speak with you.
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For More Information Contact:
Jonathan Williams
Mobile: 07855 182541
Direct Dial: 0141 530 2028
Email:jwilliams@gilsongray.co.uk
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The information and opinions contained in this blog are for information only. They are not intended to constitute advice and should not be relied upon or considered as a replacement for advice. Before acting on any of the information contained in this blog, please seek specific advice from Gilson Gray.
