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SNP follows Sunak's lead with property tax cut, but warned delay could 'do more damage than good'

Kate Forbes, the SNP Finance Secretary, making her announcement at Holyrood on Thursday - Fraser Bremner/PA
Kate Forbes, the SNP Finance Secretary, making her announcement at Holyrood on Thursday - Fraser Bremner/PA

Cuts to taxes on home purchases in Scotland must be brought in quickly to prevent paralysis of the housing market, SNP ministers have been warned.

Kate Forbes, the Scottish Finance Secretary, yesterday responded to Rishi Sunak’s stamp duty “holiday” in England by increasing the threshold for Land and Buildings Transaction Tax (LBTT), the equivalent levy north of the border. The tax would only be paid on transactions worth £250,000 or more, up from £145,000 currently, she announced.

However, unlike the changes in England, where no duty will be paid on purchases of up to £500,000, Ms Forbes said the new regime would not come into force immediately.

Rishi Sunak announced a stamp duty holiday - Jessica Taylor/AFP
Rishi Sunak announced a stamp duty holiday - Jessica Taylor/AFP

She was warned that the changes could “do more harm than good” if they were not brought in quickly, as home buyers were unlikely to complete any purchases until the new rules were in place. Those purchasing homes of £250,000 or more would save £2,100 by waiting for the new rates to take effect.

Sean McGinness, of the accountancy firm Saffery Champness, said the Scottish Government “has not matched the bold increase” announced by Mr Sunak and that the upper end of the Scottish housing market was likely to be “dampened” by the disparity.

He added: “Perhaps most importantly, though, the silence thus far on when the measures will actually take effect could have a paralysing effect.

“However attractive on paper, buyers are highly unlikely to follow through on any transactions until there is clarity.”

Ms Forbes said that eight of ten home purchases would attract no LBTT as a result of the changes, with average house prices lower in Scotland than in England and Wales.

She said the changes would come into force “as soon as possible” but that it would take time to change legislation and to allow Revenue Scotland, the agency that administers devolved taxes, to get ready for the change. Like in England, the changes will remain in place until March next year.

“I have listened to calls to raise the starting threshold for LBTT to help stimulate housing market activity and the economy,” she said. “Today’s changes will benefit house buyers and are focused directly on the particular needs of the Scottish economy.”

Ms Forbes said another £50m would also be invested in a scheme designed to help first-time buyers join the property market.

Graham Simpson, housing spokesman for the Scottish Conservatives, said it was "somewhat welcome" that Ms Forbes had agreed to overhaul the tax but that the new system should come into force straight away.

"The change has to come in immediately if it's to have any positive impact," he said. "Scheduling this move for months down the line will grind the housing market to a standstill and do more harm than good.

“A number of trades rely on people moving home to carry out work, improvements and renovations, and they need this decision to happen now.”

The tax cut would deliver a boost to the property sector, Kevin Maley, of Strutt & Parker, an estate agent and property consultancy, said.

“It will encourage more people to put their homes on the market, even beyond the normal seasonal window,” he said.

“As a result of the speculation on changes to LBTT in the last week, we have already had conversations with clients, some of whom indicated that they would be likely to consider putting their houses on the market as a direct result of any cut.”

However, he echoed calls for clarity on the timing of the change. “We welcome the tax cut and hope we receive further guidance on its implementation shortly to avoid any unnecessary uncertainty,” he said.