The property market in Edinburgh – over the years – has always created winners and losers.
And while perhaps you cannot predict if the fluctuations will work with you, or against you, there has been one constant, the need to pay stamp duty for every purchase.
To me, the payment of stamp duty has always been flawed because it prejudices people buying properties at the different tax threshold levels. As the tax is paid on the full price, buyers have to stump up significantly more if they are just over a threshold.
The announcement of the Scottish Government’s Land and Buildings Transaction Tax (LBTT) is an important change, creating both a fairer system and resulting in anyone buying a house under £325,000 making a guaranteed saving.
Unfortunately – which is often the case when something new is presented – there has been confusion with too many people being seduced into negative reactions because of the LBTT’s much-publicised increased tax levels.
The principle of the LBTT is to create a tax that is “stepped”. It means you don’t pay the tax on the full price – the rate varies at each level. Under the LBTT, two per ccent tax would apply to a house sale between £135,000 and £250,000, while a ten per cent rate will apply to those between £250,000 and £1m. Properties under £135,000 will pay no tax.
The new rates deliver a much fairer approach and the principle behind them looks genuine, rather than politically motivated.
It really is hard to argue against the sentiment that it is correct that those at the lower end pay less and those at the higher end pay more – after all you don’t buy a Rolls Royce if you can’t afford the petrol.
And while property buyers will be happy at the prospect of paying less tax, there are other benefits that should be enjoyed by the wider community. The new tax regime should encourage more first time buyers as their initial set up costs will be greatly reduced.
What people sometimes forget is that first time buyer activity creates a ripple effect right up the property ladder. So while it could help a young couple move out of their parents’ home, this new tax could also in time provide further buoyancy and confidence to strengthen Edinburgh’s housing market.
So let’s not get bogged down with the headline-grabbing tax increases and look to welcome the fact that we have a property tax regime that is fair for all.
Scott Brown is partner at Warners Solicitors and Estate Agents