Please Note: This Article is 5 years old. This increases the likelihood that some or all of it's content is now outdated.

Scottish rental property tax changes, similar those proposed in England, will deter investment in  buy-to-let properties and second homes. This will lead to even more property shortages to the detriment of first-time buyers and tenants in Scotland, warn landlords’ groups.

Several Scottish property organisations and the main Landlords’ association told MSPs and Holyrood’s finance committee that the 3% supplement (equivalent to the same amount of Stamp Duty surcharge in England), to be levied on the total price of properties over £40,000, could push up rents in the private rented sector (PRS).

According to the Courier.co.uk the Scottish Finance Secretary John Swinney said he wanted to ensure opportunities for first-time buyers “are as strong as they possibly can be” when the change was announced by him in his December draft budget for 2016/17.

The move follows almost exactly the decision by Chancellor George Osborne in his November UK Autumn Statement to raise a 3% rental property and second home tax levy in England.

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In Scotland the charge will be paid on top of the land and buildings transaction tax (LBTT), which replaced UK stamp duty in April 2015.

The Scottish Association of Landlords (SAL) is pushing for a lowering of the 3% rate and a raising of the £40k purchase price threshold in an attempt to attract more investment in the PRS in Scotland.  SAL argue that the Scottish legal framework for landlords already has a “less favourable” regime than in the rest of the UK.

Chief executive John Blackwood told the finance committee:

“We won’t have a level playing field because of the framework of regulation that we have here in Scotland, so investors will view that differently.

“We’re concerned about the future, we know we need to increase investment, however we do that, and Scotland needs to become a more attractive place to invest in the future.”

Mr Blackwood thinks that the policy change would potentially leave first-time buyers worse off if landlords currently looking to invest in properties at around the £160,000 to £200,000 mark begin to move to a lower house price bracket because of the tax.

In their written submission to the committee, the Scottish Property Federation (SPF) has said it was “puzzled as to why the Scottish Government has moved away from its principled stance of progressive taxation”.

The SPF Vice-chairman Mr Paul Curran is backing calls for exemptions from the tax charge, particularly for larger-scale investments. He said:

“The large majority of private development finance now comes from either overseas or large UK institutions.

“So, that waterfall effect of funding into Scotland particularly on things like large-scale PRS (private rented sector) is going to be impacted if we don’t have an exemption.”

Daryl McIntosh, business development executive at the National Association of Estate Agents (NAEA), has said it was a “big concern” that rents could rise or property maintenance would suffer as a result of landlords trying to recoup the cost of the supplement.

Marian Reid, deputy director of the Chartered Institute of Housing Scotland (CIH) has also raised concerns about potential for “unintended consequences” of the tax move.

“That’s why we are recommending that it is definitely important to have a review period and actually monitor how this would work on the ground,” Ms Reid has said.

Concerns are being raised in England that Chancellor Osborne, and by implication the Scottish Secretary, are taking a huge gamble with the housing market by raising these taxes on landlords.

Please Note: This Article is 5 years old. This increases the likelihood that some or all of it's content is now outdated.
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