Presenting his budget Wednesday, Scotland’s Finance Secretary John Swinney announced a tax charge on buy-to-let landlords and those buying second homes.
A 3% surcharge is to be added to the purchase price of properties intended for letting or for second homes, which is to be on top of the existing Land and Buildings Transaction Tax (LBTT), the equivalent of England’s Stamp Duty Land Tax (SDLT).
The Scot’s move follows a similar one announced by George Osborne in his November Autumn Statement. The Scottish property stamp duty was replaced by the Land and Buildings Transaction Tax (LBTT) last April.
The Scottish Fiscal Commission is expecting the new tax to raise between £19m and £27m. This would affect between 8,500 and 12,500 transactions each year, but it is expecting sales in the first year could distort these figures if they are brought forward to avoid the new tax, likely to be effective in April 2016.
There will be no change in the rates and tax thresholds for residential, non-residential and lease transactions.
Mr Swinney told Holyrood MSPs:
“I am conscious of the issue of second homes.
“We need to ensure that the opportunities for first-time buyers to enter the market in Scotland are as strong as they possibly can be and we need to make certain that tax changes elsewhere in the United Kingdom do not make it harder for people to get on the property ladder.
“That is why I today announce my intention to introduce a supplement to LBTT for those purchasing an additional home for £40,000 or more.
“Such properties will be subject to a supplement of 3% of the total purchase price, payable in addition to the existing LBTT charge.”
John Blackwood, chief executive of the Scottish Association of Landlords, has said:
“Landlords will be disappointed and frustrated by the decision by the finance secretary this afternoon to copy the policy of the Conservative Party at Westminster and punish those who choose to invest in the private rented sector (PRS) Scotland.
“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.
“We firmly believe that the biggest losers from today’s statement will be tenants who will now find it even harder to get the accommodation they want at a price they can afford.”
Bob Cherry from property consultancy CKD Galbraith, said: “Today’s announcement regarding the introduction of a 3% surcharge on the full purchase price of all additional property from April next year will undoubtedly lead to a flurry of second home purchases and buy-to-let property sales before the end of March to beat the deadline.
“This new levy will have implications for current landlords looking to sell as well as act as yet another deterrent to would-be landlords thinking about the market as an investment opportunity.
“This measure, like the LBTT rises introduced earlier this year, is also a wealth tax on owners as buyers of buy-to-lets will seek to pass on the extra purchase costs by reducing the price they are prepared to pay.”
Scots Budget – Another Assault on Buy-to-Let? – https://t.co/hu8vmuh3Uf
— LandlordZONE (@LandlordZONE) December 18, 2015