12 Dec 2018

Financial blow for landlords in today's Scottish Budget

Financial blow for landlords in today's Scottish Budget

There was a financial blow for people acquiring second homes as well as buy-to-let landlords in today's Scottish Budget.

Finance Secretary Derek Mackay announced plans to hike the additional dwelling supplement (ADS) for Land and Buildings Transaction Tax from 3% to 4% for the purchase of an additional property.

Chris Comfort, Property Partner at Aberdein Considine, comments, "The increase in ADS is a further disincentive for those looking to buy additional properties or considering entering the buy to let market in Scotland.

"It’s now less attractive to purchase a holiday home or an investment property in Scotland when compared to the rest of the UK, and its likely to have a dampening effect on property prices which is part of the government’s intention.

"As with all government policy there are winners and losers, but it should provide some comfort particularly to those first time buyers who have previously been competing against seasoned buyers with deeper pockets.  If approved the increase is expected to come into force on 25th January 2019."


There has been no shortage of criticism of Land and Buildings Transaction Tax (LBTT) since it replaced the old stamp duty system in 2015.

The Royal Institution of Chartered Surveyors last year called on Mr MacKay to urgently review the policy as it had caused a property bottleneck.

LBTT has consistently failed to raise as much revenue as expected amid claims the measure was poorly designed.

Just recently, the Scottish Property Federation (SPF) said analysis of the latest LBTT figures had highlighted a subdued generation of revenues from residential sales over the first four months of the current tax year.

In this period, revenues from residential sales were down £1.8 million (2%) against revenues for the same period in 2017.

SPF said that, if this trend continued, it would be increasingly difficult for the Scottish Government to achieve its revenue forecast for residential LBTT of £305 million in 2018-19.

Income tax

Also in today's Budget plans for 2019-20, Mr Mackay announced there would be no increase in any Income Tax rates - while starter and basic rate bands would increase by the level of inflation.

However, this move means higher earners in Scotland will be paying even more tax compared to those on the same money south of the border.

The Finance Secretary came under fire from Conservative MSP Murdo Fraser, who said senior teachers, nurses and police officers will now pay more tax in Scotland than their counterparts south of the border.

But Mr Mackay said 55% of Scots taxpayers will pay less Income Tax next year than if they lived elsewhere in the UK, and 99% will pay less Income Tax than they do this year.

The current Income Tax higher rate of 41% in Scotland currently kicks in above £43,430 - whereas south of the border the higher rate is less at 40%, and does not take effect below earnings of £46,350.

But, from next April, the gap with the rest of the UK will be even larger as the threshold for the higher rate south of the border will jump to £50,000.

Scotland's new system of Income Tax rates and bands came into force in April 2018.

Holyrood had previously matched the structure of the tax system in the rest of the UK, with three bands - a basic rate at 20%, a higher rate at 40% and a 45% top rate.

The new Scottish system added a 19% starter rate for those on low incomes, as well as a 21% level for those who earn above the median salary. It also added a penny to the higher and top rates, bringing them to 41% and 46% respectively.

Mr Mackay's announcement today on draft spending and tax plans is the first step in the Budget process, which will see MSPs vote on the proposals next month.

Scotland's property experts

If you are looking to buy, sell or lease property, Aberdein Considine can offer you the support of some of the most experienced property professionals in the country.

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If you would like to speak to a member of our team, call 0333 0066 333 or click here.

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