Bell Ingram - serving UK's land and property owners to make the most of their assets
“Dampening” Effect of LBTT in Scotland
The introduction of Land and Buildings Transaction Tax (LBTT) to replace stamp duty is having an “eye watering” impact on the property market in certain parts of Scotland, according to a leading land and estate agent.
While a Scottish Government committee has hailed the introduction of LBTT in Scotland an “operational success”, Perthshire-based Bell Ingram say the market picture is a complex one, with a range of effects being reported, including one buyer who has had to pay £130,000 in property taxes.
Bell Ingram’s role as a national land and estate agency firm means it is able to provide a unique perspective on the varied outcomes of the tax, informed by a wide network of agency offices across the country.
LBTT was introduced in Scotland in April 2015 in place of UK Stamp Duty Land Tax (SDLT), with the aim of being designed so that the tax charge is more proportionate to the actual price of the property.
Carl Warden, of Bell Ingram’s Perth office, spoke of how the impact of the tax regime has been marked in Perthshire and the surrounding area.
Carl said: “We recently sold a property at £1.15m and the LBTT was £96,350, compared to stamp duty in the rest of the UK at only £58,750 – that’s a £37,600 difference.
“This transaction also attracted an additional 3% second home tax of £34,500, which was a grand total of an eye watering £130,850 in purchase taxes.
“Transactions attracting this level of tax are making people do one of two things; either not move at all, or negotiate hard on the asking price based on the vendor reducing their price by the level of tax due.”
Will Banham, of Bell Ingram’s Oban office, spoke of how LBTT has also had unusual and unintended consequences for the west coast of Scotland.
Will said: “While LBTT has had a dampening effect on the country house market, the real impact on the west coast has come from the 3% premium for second homes.
“Much of the market across coastal Argyll and the Inner Hebrides is heavily dependent on incoming buyers, a significant proportion of whom are seeking a holiday home. A traditional west coast bothy of £140,000 will attract no LBTT, but a second home buyer will pay tax of £4,200.
“This tax was designed to make property more affordable for first time buyers but, in practice, many of these properties would be totally unsuitable for permanent occupation due to their basic accommodation and remote locations. This has simply caused downward pressure on prices, with most buyers explicitly discounting their offers by the exact amount of extra tax due. It is very much a buyers’ market, with vendors losing out.
“Following the Scottish government’s budget, there seems little doubt that the new LBTT regime is here to stay for now, but it will be interesting to see whether the government will review their policy if it is seen to be damaging the market.”
In more rural areas of northern Scotland, the tax has had a more limited impact.
Joanne Stennett, of Bell Ingram’s Inverness office, said: “In the North of Scotland, the tax has had very little impact.
“The majority of homes are of lower value and are therefore not affected unless they are second homes. The main trend we have been seeing is more people moving to the Highlands particularly from Southern England.”
Established 117 years ago, Bell Ingram has 130 professional staff across 11 UK offices including: farm, estate and forestry managers; chartered surveyors, estate agents, architects, planners, and building surveyors; and tourism, GIS mapping, and renewable energy specialists.
More in the Press
Published on 20th December 2016