Homebuyers Feel The Pinch As Scottish Property Tax Soars

Homebuyers in Scotland are grappling with soaring property taxes as the Scottish government raked in a record amount from Land and Buildings Transaction Tax (LBTT) per sale this August. This comes amid a climate where owning a home seems more like a financial burden rather than a milestone.

Sky-high Taxes in August

The month of August 2023 saw the Land and Buildings Transaction Tax (LBTT) revenues hitting a new record per transaction in Scotland. According to a study by a major property firm, DJ Alexander, the government collected a whopping £64.1 million from just 8,950 sales during this period. This meant that, on average, each transaction was taxed £7,162, marking the highest ever recorded average tax per sale.

A Closer Look at the Figures

While August saw a record average, the total revenue collected was the third highest ever, with the leading months in this taxation bonanza being since July 2022. The all-time high month was October 2022 when the Scottish government filled its coffers with £65.8 million from 10,050 sales.

David Alexander, the CEO of DJ Alexander, highlighted how the LBTT continues to be a significant source of revenue for the Scottish government, particularly taxing second homeowners and property investors heavily. However, he shed light on a worrying trend where a scant 1,600 buyers contributed to 83.4% of the total tax collected, indicating a dwindling pool of contributors.

The Crux of the Matter

The detailed analysis unveiled that most of the revenue was harvested from a small number of high-value sales. An additional dwelling supplement (ADS), a 6% surcharge on top of LBTT for second homes and investment properties, further boosted the revenue. Of the £42.9 million collected from sales without ADS in August 2023, a hefty sum of £35.8 million came from just 1,600 sales. These transactions were taxed an average of £22,375 in LBTT, representing 83.4% of the revenue from just 17.9% of the sales.

Moreover, ADS itself brought in £21.2 million, making up 33.1% of the total revenue in August 2023.

Concerns Over Rising Home Ownership Costs

The focus on tax revenue through home sales is raising eyebrows and concerns among citizens and experts. Mr. Alexander criticised the approach of targeting homeowners with higher taxes throughout their lives, mentioning the proposal of a Scottish version of inheritance tax and escalating council tax charges for band E properties.

He emphasized that these higher taxes, often painted as targeting the wealthy, are indeed affecting ordinary working individuals who find buying a home increasingly taxing, literally. Many homes valued over £325,001 are owned by regular working citizens, not just millionaires or the proverbially ‘greedy bankers’.

Mr. Alexander’s overarching message was clear: homeownership is becoming a cash cow for governments, and this taxation approach is hardly a method to make Scotland an inviting place to live, work, and invest.