A leading agent has suggested that some parts of the UK would face “a property exodus” if Boris Johnson’s proposals for stamp duty reform came into effect.
David Alexander, joint managing director of property management firm Apropos by DJ Alexander Ltd, says Johnson’s proposal to scrap stamp duty for homes below £500,000, would prove “disastrous” for the Scottish property market.
He says the proposal is aimed at injecting some life into the flagging London property sector but would open up an enormous disparity in taxation between different parts of the UK.
In Scotland home buyers already pay more in property taxes due to the devolved land and buildings transaction tax - the Scottish equivalent of stamp duty - which means that Scots pay £3,350 more than their UK counterparts for a £400,000 home and £8,350 more for a property costing £500,000.
“The Johnson proposal would substantially exacerbate this difference” insists Alexander.
“There is already a financial disparity between the Scottish and UK property markets with markedly higher levels of tax charged on homes north of the border valued at £330,000 upwards. If Boris Johnson’s proposal came into force it would mean that homebuyers in Scotland would be paying £4,600 in LBTT for a £300,000 home and £13,350 in tax for a £400,000 property while people in England paid nothing” he continues.
“This idea, in conjunction with Mr Johnson’s proposals for raising the higher rate personal tax threshold to £80,000 would disproportionately punish Scots income and their house buying costs. The tax threshold changes would result in Scots earning £80,000 paying £7,844.07 more in tax per year which in, itself might be a disincentive to move to Scotland.”
And he says landlords and property investors considering buying in Scotland would be even worse off than owner-occupiers.
“A £200,000 second property in Scotland would cost the purchaser £9,100 in tax compared to £6,000 in the rest of the UK if the Johnson proposal as implemented. At £400,000 the difference is £28,350 more in Scotland while those able to afford to buy a £1m second home would find themselves paying £118,350 (just under 12 per cent charge on second home ownership) in LBTT.”
He makes no bones about the effect all of this would have outside of London generally and in Scotland in particular.
“If this proposal is introduced early in the expected Johnson prime ministership there would be an immediate end to property investment in Scotland. Why would anyone want to pay so much in taxes when in another part of the UK they would be charged so much less? Under these proposals, investors, second homeowners, and landlords would find everywhere but Scotland a much more attractive place to invest in and would take their money elsewhere.”