SCOTTISH Government finances have been given a boost with a seasonal upturn in the property market generating the third highest monthly return on the Land and Buildings Transaction Tax (LBTT) since it was introduced in 2015.
Revenue Scotland figures analysed by the Scottish Property Federation (SPF) show revenues from the tax brought in £57 million in June, over £14 more than May’s total and £13m up on June last year.
The commercial property sector generated the biggest increase, generating £21.8m, a rise of £8.1m on May and £10.7m on June 2017.
According to the SPF, the residential element of LBTT generated £24.1m in June 2018 – a rise of £4.7m on May’s figures and £800,000 up on June last year.
The supplement for additional dwelling also played a strong role in the overall figures and increased to £11m in June.
LBTT is expected to generate a total of £588m in 2018/19 in the Scottish Government’s draft budget – an increase of £25m (4%) on the revenue it generated in 2017/18.
SPF director, David Melhuish, said: “This year, the Scottish Government expects to see a 17.5% annual increase in revenue from the residential sector, and a slight drop in revenue from the commercial property market.
“However, in the first three months of this tax year to June, we have seen revenues slightly underperform against the Scottish Government’s expected trends for the main residential market.
“Despite a good month in June for the Government, residential LBTT revenues fell below 2017/18 levels in both April and May, but with some of the busiest months for the residential market still to come the Government will have an opportunity to make up ground.
“Meanwhile, the commercial market is showing initial signs of being better than forecast and so far, this year has generated just over £10m more than in the same period in 2017/18.
“The additional dwelling supplement also continues to deliver better than expected revenue for the government, albeit with some 19% now refunded to taxpayers since its introduction in April 2016.
“For now, it will be steady as it goes for the government, but there is considerable dependency on the £325,000 to £750,000 residential market band, which supports nearly 60% of residential LBTT revenue, based on less than 10% of the total number of sales.
“Should this section of the market stall, as in 2015/16, then there could be a significant impact on revenue.”
The LBTT was introduced in April 2015 – the first tax to be introduced by the Scottish Government in 200 years – as a replacement for stamp duty.
Despite some misgivings, it saw 90% of Scottish home buyers paying less, or the same amount, as under the old system.
Soon after its introduction, house sales for June in one set of figures from Your Move/Acadata, reached a seven-year high, with almost 10,000 houses moving through the market.
The following year saw a 3.3% rise in volume of Scottish house sales in figures from Registers of Scotland, which noted that the usual monthly pattern of market transactions was affected by the introduction of the tax.
However, there was an increase in both the volume and market value of Scottish property sales in 2016, though the average price of a residential property fell slightly on the previous year.
Increases in the average price of residential property and the volume of property sales rose again last year – the average price was up by 4% to £172,779, while sales volume rose by 4.2% from 99,403 to 103,617.
Although all price bands saw a rise in sales in the Registers of Scotland figures, by far the most popular price fell between £40,000 and £145,000 – the original zero-tax threshold for first time buyers.
That was raised in June this year to £175,000.
SCOTTISH Government finances have been given a boost with a seasonal upturn in the property market generating the third highest monthly return on the Land and Buildings Transaction Tax (LBTT) since it was introduced in 2015.
Revenue Scotland figures analysed by the Scottish Property Federation (SPF) show revenues from the tax brought in £57 million in June, over £14 more than May’s total and £13m up on June last year.
The commercial property sector generated the biggest increase, generating £21.8m, a rise of £8.1m on May and £10.7m on June 2017.
According to the SPF, the residential element of LBTT generated £24.1m in June 2018 – a rise of £4.7m on May’s figures and £800,000 up on June last year.
The supplement for additional dwelling also played a strong role in the overall figures and increased to £11m in June.
LBTT is expected to generate a total of £588m in 2018/19 in the Scottish Government’s draft budget – an increase of £25m (4%) on the revenue it generated in 2017/18.
SPF director, David Melhuish, said: “This year, the Scottish Government expects to see a 17.5% annual increase in revenue from the residential sector, and a slight drop in revenue from the commercial property market.
“However, in the first three months of this tax year to June, we have seen revenues slightly underperform against the Scottish Government’s expected trends for the main residential market.
“Despite a good month in June for the Government, residential LBTT revenues fell below 2017/18 levels in both April and May, but with some of the busiest months for the residential market still to come the Government will have an opportunity to make up ground.
“Meanwhile, the commercial market is showing initial signs of being better than forecast and so far, this year has generated just over £10m more than in the same period in 2017/18.
“The additional dwelling supplement also continues to deliver better than expected revenue for the government, albeit with some 19% now refunded to taxpayers since its introduction in April 2016.
“For now, it will be steady as it goes for the government, but there is considerable dependency on the £325,000 to £750,000 residential market band, which supports nearly 60% of residential LBTT revenue, based on less than 10% of the total number of sales.
“Should this section of the market stall, as in 2015/16, then there could be a significant impact on revenue.”
The LBTT was introduced in April 2015 – the first tax to be introduced by the Scottish Government in 200 years – as a replacement for stamp duty.
Despite some misgivings, it saw 90% of Scottish home buyers paying less, or the same amount, as under the old system.
Soon after its introduction, house sales for June in one set of figures from Your Move/Acadata, reached a seven-year high, with almost 10,000 houses moving through the market.
The following year saw a 3.3% rise in volume of Scottish house sales in figures from Registers of Scotland, which noted that the usual monthly pattern of market transactions was affected by the introduction of the tax.
However, there was an increase in both the volume and market value of Scottish property sales in 2016, though the average price of a residential property fell slightly on the previous year.
Increases in the average price of residential property and the volume of property sales rose again last year – the average price was up by 4% to £172,779, while sales volume rose by 4.2% from 99,403 to 103,617.
Although all price bands saw a rise in sales in the Registers of Scotland figures, by far the most popular price fell between £40,000 and £145,000 – the original zero-tax threshold for first time buyers.
That was raised in June this year to £175,000.
Sliding scale from zero to thousands
DEATH and taxes may be this world’s only certainties as Benjamin Franklin noted, but stamp duty was the subject of much criticism in its time.
And it seems that its replacement the Land and Building Property Tax (LBTT) has carried on that tradition.
There have been claims that LBTT has been responsible for locking first-time buyers out of the housing market, especially in more expensive areas, and putting off investors.
It works by charging property buyers a set amount on a sliding scale depending on the value of their property.
There is a zero-tax threshold for first-time buyers – recently raised to £175,000 – but they can benefit if they buy a property above that limit with relief on the portion of the price below the threshold.
This means they can end up paying no tax on their first home.
Otherwise buyers will pay £100 on a property costing up to £150,000; £600 on a £175,000 home; £1100 if it costs £200,000; £2100 if it costs £250,000, up to £23,350 on a property priced at £500,000, or £78,350 on a £1 million property.
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