Swinney’s budget promises £4.5bn of infrastructure investment
Finance secretary John Swinney delivered a budget yesterday which pledged to provide £4.5 billion of infrastructure investment in 2015-16.
Setting out the Draft Scottish Budget 2015/16 to the Scottish Parliament, Mr Swinney’s plans will also provide £330 million of further capital investment in the Scotland’s Schools for the Future programme through NPD funding, £140m to deliver two new college campuses through the NPD pipeline, over £390m to deliver 6000 affordable homes and a total of £79m to support improvements in domestic energy efficiency through the Home Energy Efficiency Programmes for Scotland (HEEPS). The housing sector will also benefit from £125m of additional financial support.
The draft budget also proposed a new Land and Buildings Transaction Tax to replaces the existing UK stamp duty land tax paid when buying property over a certain value.
The finance secretary said the tax-free threshold below which house buyers will not need to pay any tax, currently £125,000 under the stamp duty system, will benefit first-time buyers and those at the lower end of the housing market.
The rates will also:
- Take 5,000 additional house purchases out of tax by ensuring that nobody will pay tax on the first £135,000 of their house purchase - £10,000 higher than the current stamp duty threshold;
- Ensure that no tax will be payable on 45 per cent of transactions;
- Reduce the tax charge relative to stamp duty for a further 44,000 house purchases up to £325,000; and
- Ensure that 90 per cent of homebuyers will either pay less or the same amount as they would under current arrangements.
This new tax, as well as a Scottish Landfill Tax, are due to come into effect on 1 April next year.
The two devolved taxes will be collected by Revenue Scotland and are expected to bring in an estimated £558m in 2015-16.
Finance secretary John Swinney said: “The old stamp duty was outdated - causing unfair tax hikes at set property prices. This led to the market being distorted and led people to try to avoid tax.
“Our proposed residential transaction rates will be more proportionate to the house price, and means that the tax is fairer as it is based more closely on the buyer’s ability to pay.
“The increase in the level before paying tax will also benefit around 5,000 homebuyers a year – helping first time buyers and improving the affordability of starter homes. This new approach will benefit the majority of Scots, 90 per cent of homebuyers will either pay less or the same amount as they would under current arrangements.
“For example, a couple buying their first home for £140,000 will pay £100 under the new system, £1,300 less than the stamp duty charge which applies now. A family buying a new home for £260,000 will pay £3,300 under the new transaction tax – that’s a saving of £4,500 compared to stamp duty.
“New taxation and borrowing powers are a step forward but I believe that the Scottish Parliament should be responsible for the full range of taxes levied in Scotland. This way we can continue to drive forward prosperity and fairness in Scotland for all of our citizens.”
Trade body Homes for Scotland said it would await the details on the extra £125m funding for housing.
Philip Hogg, chief executive of Homes for Scotland, said: “We are pleased to hear that an additional £125m has been allocated to support Housing Supply but await to find out how exactly this will be allocated. The hugely successful Help to Buy (Scotland) scheme exhausted its funding earlier this year and would be an obvious suitable beneficiary for additional resource. We also hope that our calls for assistance for smaller homebuilders, who have struggled to access bank lending, will be answered, as they have a key role to play in delivering the many thousands of new homes that Scotland desperately needs.”
In addition, commenting on the clarity offered by Mr Swinney on the intended rates and bands for the new Land and Buildings Transaction Tax, Philip Hogg added: “With all home purchases under £325,000 set to ‘win’ under the new system, the plans for LBTT set out by Swinney have the potential to support an active housing market.
“We are pleased to see support given to the lower end of the market to assist first time buyers and those on the lower rungs of the market, for example a buyer purchasing a home valued at £160,000 will pay only £500 in LBTT, a staggering £1,100 less than they would have paid under the current stamp duty system.
“However, we are yet to fully assess the impact that an increased tax take from higher value homes, and an increase in tax charged on land purchases, in meeting the Scottish Government’s desire to be revenue neutral, will have on home building businesses. Once established we will be respond to Swinney’s draft budget accordingly.”
Douglas McLeod, regional director for Barratt Homes in Scotland, said: “The Finance Secretary’s move to introduce the Land and Buildings Transactions Tax as a replacement for stamp duty will, at the rates proposed, either reduce the burden for buyers of properties up to £325,000 in value or see them no worse off. This may assist customers who want to make the next step on the housing ladder at this level, but are being put off by the prospect of high stamp duty charges.”