Private rented sector landlords in Scotland and second home owners face an extra 3% stamp duty tax from next year which will bring them into line with changes in England and Wales.
It was only a matter of time before the change came about after the UK Chancellor George Osborne announced the additional tax for England and Wales in his recent Autumn Statement.
Scottish Finance Minister John Swinney said that he would bring forward legislation on the new second home charge soon so that it could be in force by April 2016. ‘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 UK do not make it harder for people to get on the property ladder,’ he explained.
It means that an extra 3% rate will apply to the purchase of additional properties, such as buy to let and second homes from 01 April 2016 and be levied on the total price of the property for all sales above £40,000 on top of the current LBTT rates.
The Scottish Government has forecast that it will raise overall LBTT receipts in 2016/2017 by between £17 million and £29 million, rising to a possible £66 million by 2020/2021. Overall the Government expects LBTT will raise £295 million in 2016/2017.
John Blackwood, chief executive of the Scottish Association of Landlords, said that landlords will be disappointed and frustrated by the decision which will effectively ‘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,’ he added.
Oliver Knight, a senior analyst in Knight Frank’s residential research department, said that sales will be brought forward as landlords and others seek to minimise their property tax burden.
He added that buy to let property investors will also be able to continue offsetting all stamp duty against capital gains tax when they sell their property.
Bob Cherry, partner at property consultants CKD Galbraith, also believes that there will be a flurry of activity before the end of March 2016. ‘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,’ he said.
‘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,’ he added.
Source: Property Wire