Agent's research shows property tax flaws

Purchasers of mid-range' homes may end up paying far more in tax than the very rich under the Scottish government new Land and Buildings Transaction Tax according to research conducted by estate agency Rettie & Co.

The new LBTT, which will apply across Scotland from next April, has a progressive tax structure and works in a similar way to income tax.

For residential land and buildings, there will be a nil rate band on homes costing up to £135,000. From £135,001 to £250,000 the LBTT will be two per cent.

Between £250,000 and £1m - what Rettie & Co refers to as the mid-range properties - the rate will be 10 per cent. Above £1m the tax will be 12 per cent.

Rettie, analysing patterns of sales, has published research showing those buying properties worth between £325,000 and £500,000 will pay the highest proportion of tax. Buyers in this price band in Edinburgh, for example, will pay £6.1m more per year when the levy replaces stamp duty.

However, those purchasing homes worth more than £1m will end up paying only £3.6m more than today.

The analysis also disclosed that house buyers in the capital will together pay £12.8m more than currently paid under stamp duty.

John Boyle, Rettie's director of research and strategy, said LBTT was a further tax on the squeezed middle.

He says: This is not a tax take that is most affecting the super rich', but rather those purchasing fairly modest family homes. The average price of four-bed detached homes in areas such as Morningside, The Grange, Murrayfield and Fairmilehead is well in excess of £400,000.

And this all assumes the existence of the tax does not stifle transactions to the degree that the revenue generated does not fall from the level currently enjoyed under stamp duty.