03 Dec 2014

Comment: George Osborne's Autumn Statement

Comment: George Osborne's Autumn Statement

 

Graham Scott, Partner, comments on the Autumn Statement and the impact for Scotland.

The headline grabbing facet of the Autumn Statement is undoubtedly the Stamp Duty Land Tax (SDLT) reform. Whilst being broadly welcomed by our neighbours south of the border, in Scotland the news has been met with a sense of uncertainty rather than satisfaction.

To be clear on the key question, the new rates announced by George Osborne do apply to property transactions in Scotland from December 4 through to April 1 next year.

Land and Buildings Transaction Tax

The Land and Buildings Transaction Tax (LBTT) announced by the Scottish Government in October will come into force from April 1.

What does that mean for the north south divide from that point on? Much depends on which bracket of the housing market you find yourself in. For anyone purchasing a house over £254,000 the LBTT will prove more costly than for those spending the same in England and Wales under the new SDLT rates. In my opinion, any tax change which creates a divide or sense of injustice is unlikely to be positive.

How the changes influence the Scottish housing market in the interim period remains to be seen, but certainly there will be advantages for many people to push through transactions before the LBTT is introduced in April. For example, a £925,000 property would incur £36,250 of Stamp Duty charges at the rate of 5% up to that date – as opposed to £69,800 of LBTT with its 10% rate from April 1.

For those falling under the £254,000 threshold there will effectively be little difference, so many transactions across Scotland will not be impacted. That should protect us from a widespread rush, but I’m sure there will be extra impetus to get a number of deals across the line from those who will be hit in the pocket by the changes. That will be particularly evident in areas with higher average house prices - with Aberdeen, Aberdeenshire, Edinburgh and East Renfrewshire among those where we would expect to see some movement.

The SDLT changes will provide food for thought for buyers, sellers and professional advisors – but the Autumn Statement did bring some less contentious announcements.

Additional Reforms

The widely trailed changes to the pension system should be welcomed, notably the ability for unspent pension funds to be passed tax free to the saver’s heirs. On a similar theme, the tax free status of ISAs will also be able to be retained by a surviving spouse in the event of the saver’s death. Both of those measures are designed to protect the families of those who have planned for their future.

The younger generation has not been forgotten, or perhaps more accurately their parents have not. The removal of Air Passenger Duty for passengers under  the age of 12, effective from May 2015, will represent a significant saving for families travelling abroad. It will not have a major bearing on the Treasury but may well sway a few floating voters when the election rolls around – a subtle reminder that the Autumn Statement is, of course, a political exercise.

Graham Scott, Partner

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