Scotland’s property taxes rocket by 50% in two years

Property tax collections in Scotland have surged by 50% in just two years, an analysis reveals.

Lettings and estate agents DJ Alexander Ltd, shows how revenues for the Scottish Government originating from the Land and Buildings Transaction Tax (LBTT) have soared in June 2023.

It says the Scottish Government collected £61.7 million in June 2023 – from just 8,780 property sales.

That’s an average of £7,027 per transaction.

In June 2021, the governmental coffers saw £52.1 million from 11,120 transactions, with each property contributing an average of £4,685.

Jump in the average property sales revenue

The firm says the £2,342 jump in the average property sales revenue is a 49.9% rise over two years.

The government raised £650.3 million from July 2022 to June – an increase of 10.5%.

However, June has also seen the highest ever figure of £21.8m for additional dwelling supplement (ADS) which is paid on second homes and those bought to be offered to let in the private rented sector.

The firm’s chief executive, David Alexander, said: “These figures highlight just how much the tax on buying a home in Scotland has risen in recent years.

“That the average amount paid is now almost 50% more per home than just two years ago indicates just how high LBTT has become.”

Rates are much higher in Scotland for first time buyers

Mr Alexander explained that the rates are much higher in Scotland for first time buyers because the charge begins at £175,000 compared to £425,00 in England.

And there is no charge on the first £250,000 purchase price in England, compared to 2% between £145,000 and £250,000 in Scotland.

England’s rules also see a 5% property tax on properties between £250,000 and £925,000, whereas in Scotland it is 5% between £250,000 and £325,001.

And for those spending more than £325,001, it is 10% up to £750,00 and 12% beyond that – this higher rate only applies to properties in England valued at more than £1.5m.

Investing in the private rented sector

Mr Alexander said: “For those buying a second home or investing in the private rented sector then there is an additional dwelling supplement (ADS) of 6% on top of the LBTT which means that for a property valued at more than £750,000 which is not your principal home, the charge will be 18% of anything above three quarters of a million pounds.

“While these numbers undoubtedly reflect the continued vibrancy of the Scottish property market, it is quite a fragile financial proposition to rely on the generosity of a relatively small number of homebuyers to fund such large amounts of tax.

“For example, just 1,600 buyers contributed £32.7m in LBTT, without including some of those who must also have paid ADS, which represents 81.2% of all non-ADS residential property tax raised in June.”

He added: “Being overly reliant on a very small number of people and depending on them to continue to buy in Scotland when the costs are now so much more than the rest of the UK, is risky as a long-term strategy.

“We need to ensure that Scotland continues to have a strong and lively housing market and part of this must be fairer taxation on property.

“There is a very real risk that our much higher taxation results make it more difficult to attract wealth creators and high earners in the coming years who are essential in creating a dynamic, growing Scottish economy.”

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