Scottish Government sees LBTT revenues soar
The strong residential market and recovery in commercial property transactions has seen the Scottish Government benefit from a significant increase in revenue from the devolved Land & Buildings Transaction Tax (LBTT).
As featured in our monthly newsletter, SPF Voice, recent data from Revenue Scotland has shown that between April 2021 and March 2022, LBTT revenues increased by £320.2m (63%) compared to the same period in 2020-21, to £831.6m. This is the highest annual LBTT outturn since the tax was established in 2015-16, with all three constituent elements of LBTT (residential, non-residential and ADS) seeing record levels of revenue.
The outturn for the year, once finalised, is likely to be considerably in excess of the Scottish Fiscal Commission's (SFC) forecast made in December 2021 for LBTT revenue to hit £720m. December's forecast had already increased by £134m compared to SFC's earlier prediction for 2021-22 made at the start of the year.
With inflation and interest rates on the rise, we are concerned about the growing number of home buyers who will be paying higher rates of LBTT should the Scottish Government keep its policy of maintaining the current thresholds and rates until the end of the current Scottish Parliament (potentially 2026).
Our analysis of Registers of Scotland data shows that properties being sold for £145,000 or less are seeing their share of the Scottish residential market decline, and inflexibility in setting the thresholds could result in significant tax liabilities for buyers of relatively modest homes in the country's property hotspots.
With a review of the ADS element of the tax already underway, we will continue to make the case for a more dynamic approach to setting the thresholds of the other elements of LBTT to ensure they reflect changes in the market and wider economy.
(Source: Revenue Scotland)
