Property taxes in Scotland up 50% in two years

In his latest article, David Alexander discusses the rapid rise in property taxes collected in Scotland in recent years.

Property taxes collected in Scotland have risen nearly 50% in two years according to analysis of the latest statistics by a leading property firm.

DJ Alexander Ltd, which is the largest lettings and estate agency in Scotland, said that the Scottish Government revenues from Land and Buildings Transaction Tax (LBTT) in June 2023 were £61.7m from just 8,780 sales which equates to an average of £7,027 per transaction.

In June 2021, the Government collected £52.1m from 11,120 transactions which equates to £4,685 per property.

This means that revenue per sale has risen by £2,342 which is an increase of 49.9% in 24 months.

In the last year, a total of £650.3m was raised between July 2022 and June 2023 which was a 10.5% increase on the same period the year before.

June also recorded 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.

David Alexander, the chief executive officer of DJ Alexander Scotland, commented: “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.”

“The rates are much higher here for first time buyers because the charge begins at £175,000 in Scotland compared to £425,00 in England.

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

“In England there is a 5% property tax on properties between £250,000 and £925,000 whereas in Scotland it is 5% between £250,000 and £325,001.

“For those spending more than £325,001 it is 10% up to £750,00 and 12% beyond that with this higher rate only applying to properties in England valued at more than £1.5m.”

“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.”

Alexander concluded: “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.”