Swinney Cuts Property Tax Rates

Proposed new tax rates on Scottish property purchases have been cut, with the Scottish Government stating that the majority of people will be better off than under the current UK system. Finance Secretary John Swinney announced revisions to his Land and Buildings Transaction Tax (LBTT) rates - which will replace stamp duty for homebuyers in Scotland from April - as the majority of MSPs backed his spending plans for the year ahead. The changes mean that nobody will pay tax on properties costing less than £145,000, but those buying the most expensive homes will have to pay more. Mr Swinney said the Government was putting "fairness, equality and the ability to pay'' at the centre of its decisions. Labour described the revisions as a "U-turn'', while the Conservatives gave them a partial welcome. Those working in the property industry hailed them as a boost for first-time buyers, but were cautious about the implications for the top end of the market. The Finance Secretary first revealed details of the rates for the new LBTT when he set out his draft 2015/16 Budget in October. But after Chancellor George Osborne made changes to stamp duty some two months later, Mr Swinney has now announced a series of alterations to LBTT before it has even come into force. These will mean residential properties worth up to £145,000 will not attract any tax, up from the proposed £135,000. For sales between £145,000 and £250,000, a tax rate of 2% will be applied, with the introduction of a new rate of 5% between £250,000 and £325,000. Mr Swinney had previously planned a tax rate of 10% on homes sold between £250,000 and £1 million - prompting fears that those buying family homes could be hit. But now the 10% rate will be applied to properties valued between £325,000 and £750,000. The top rate of 12% - which was previously going to apply to houses worth more than £1 million - will now take effect from £750,000. Mr Swinney said: "As a result of my announcement today more than 90,000 taxpayers - nine out of 10 taxpayers - will be better or no worse off under the Scottish system than under UK stamp duty land tax. "With 50% of transactions lifted out of tax altogether, the measures I am proposing today send a very clear message. In exercising our first judgements on national taxes, this Government has put fairness, equity and the ability to pay at the very heart of the decisions we have taken.'' Labour's Jackie Baillie said: "Having announced his intentions at the tail end of last year to make this a fair and progressive tax, it took John Swinney just 100 days to change his mind - that must be the fastest U-turn in history.'' But she added: "I am very happy to look at the detail of Mr Swinney's proposal. For our part we will support anything that helps homeowners and indeed the house building industry.'' Tory Gavin Brown praised Mr Swinney for having been in "listening mode'', and hailed what he described as a tax cut of around #64 million in relation to the rates set out in October. He said: "Where I do have some concern is that we still have a sharp increase and we have a jump to 10% at a comparatively lower rate than we do in the rest of the UK. "It raises up at £325,000 to the 10% rate which still, I have to say at first blush, strikes me as particularly low to move up to 10%.'' He added: "It is still a tax on aspiration to a degree, to a lesser degree than it would have been.'' Royal Institution of Chartered Surveyors Scotland director Sarah Speirs said: "RICS welcome the increase of the minimum threshold to £145,000, which will further assist first-time buyers, potentially increasing activity at the lower end of the market. "The amended bands should reduce distortion and ensure those at the top end of the market contribute equitably, however we will continue to monitor the upper end of the market as there is potential for it to stagnate under LBTT, and if we want a functioning market, it has to work at all levels.'' Mr Swinney argued his spending plans for 2015-16 contained a "range of measures focused on making Scotland a more prosperous country, tackling inequality and protecting and reforming our public services'', with an NHS budget of more than £12 billion, and cash for affordable homes and tackling fuel poverty. Labour called for a £100 million NHS frontline fund, more money for local government, a £10 million resilience fund in light of the oil crisis and the creation of a Scottish Office for Budget Responsibility to scrutinise the budget. "We should have no fear of transparency and scrutiny, and this is urgent as we need to build capacity in Scotland for an OBR that can provide an effective scrutiny mechanism from day one,'' Ms Baillie said. Liberal Democrat leader Willie Rennie said his party would work "constructively'' with the Scottish Government to put the NHS, mental health and childcare at the heart of the Budget. Green MSP Patrick Harvie urged the Scottish Government to provide more funds for councils coping with applications for hydraulic fracturing, or fracking, developments, and to increase spending on fuel poverty programmes. MSPs backed the general principles of the Budget (Scotland) (no 4) Bill by 66 votes to 0 with 55 abstentions.