Despite the hefty tax rates associated with purchasing properties in Scotland, the real estate market continues to exhibit resilience, showing strong demand among buyers.

Scotland’s property tax revenue has remained consistent over the last year, amassing a total of £623.1 million, as reported by property firm DJ Alexander. This figure includes a significant contribution from the additional dwelling supplement (ADS), which is a 6% tax levied on second homes and properties bought by landlords and investors. The ADS alone generated £194.5 million, underscoring its impact on the overall tax intake.

Comparisons with England

David Alexander, CEO of DJ Alexander Scotland, expressed concern over the disparity in taxation between Scotland and England. He pointed out that Scottish buyers face much steeper tax obligations compared to their English counterparts. This difference, Alexander suggests, might be influencing the dynamics of the market, although it’s unclear how much the demand would change if the tax rates were aligned. He speculates that adjusting the tax rates might stimulate even greater demand within the Scottish property market.

A Closer Look at Property Taxes

In Scotland, properties priced between £325,001 and £750,000 are subject to a 10% Land and Buildings Transaction Tax (LBTT), which is analogous to the Stamp Duty Land Tax (SDLT) in England. Alexander criticised these taxes as convenient revenue sources for governments, emphasising their visibility and inevitability during property transactions. Such high taxes, he argues, may discourage future investments in Scotland, potentially affecting the market’s sustainability.

The Implications of High Taxes

The persistent high taxes in Scotland could deter both individuals and companies from moving to or investing in Scotland. The fear is that if Scotland continues to impose higher taxes than other parts of the UK, it might become a less attractive destination for both living and investing.

Despite these concerns, the property market in Scotland is performing well for now, supported by a steady influx of investment into the private rental sector. This indicates a robust market that continues to attract investors despite the financial barriers imposed by current tax policies.