JOHN Swinney has bowed to pressure and rewritten the SNP's replacement for stamp duty after being undercut by Tory Chancellor George Osborne.
The Finance Secretary will this week announce new rates and bands for his flagship Land and Buildings Transaction Tax (LBTT), just three months after setting them in a blaze of publicity.
The devolved tax, the first to be wholly set and collected in Scotland for more than 300 years, will replace stamp duty north of the Border in April. It is designed to be more progressive than stamp duty, helping those buying small homes by taking more tax from those buying larger ones.
It is levied across stepped bands, like income tax, instead of at a single rate like stamp duty.
Swinney's original October plan meant LBTT should have been cheaper than UK stamp duty for 90% of homebuyers, with only those paying more than £325,000 for a house receiving a bigger bill.
However, in a copycat move in December, Osborne announced his own immediate overhaul of stamp duty, undercutting Swinney's version. Overnight, he lowered stamp duty for 98% of homebuyers, with only those paying more than £937,000 facing a bigger bill.
It made the incoming LBTT dearer than stamp duty for thousands of middle-class Scots.
Instead of 10% of people paying more with LBTT, the figure became 20%, while the threshold for paying more fell to £254,000, just above the average price of a detached home in Scotland. Since Osborne's move, Swinney has faced mounting calls to U-turn on his LBTT rates.
Last night, he confirmed new rates would be announced to MSPs on Wednesday ahead of a stage one vote on the 2015-16 Scottish budget.
The changes are expected to mean that, as before, only 10% pay more under LBTT than stamp duty.
He said: "At the time of the Chancellor's Autumn Statement I said his imitation of my Scottish tax plans was the sincerest form of flattery. On the first occasion I've had to design a tax system for Scotland, the UK Government copied it instantaneously and applied it across the UK.
"Under my proposals - designed for the Scottish market, not London prices - 90% of homebuyers would have been better or no worse off, and 5000 homes would be taken out of taxation all together, helping those at the lower end of the market.
"The Chancellor's decision to introduce a new stamp duty system overnight, without warning and consultation, means that while 80% of homeowners continue to pay less tax or no tax at all under LBTT, we now have the opportunity to review the rates and ensure they are right for Scotland."
The shift follows a deal with the UK Government that gave Swinney £64 million more than he had forecast. The Treasury was expected to cut Scotland's block grant by £558m to offset income from LBTT and a devolved landfill tax, but instead cut £494m.
Previous UK stamp duty was long criticised as an unfair "slab tax", kicking in at £125,000 and with 1% charged on sales up to £250,000, 3% on those between £250,000 and £500,000, 4% on those between £500,000 and £1m, 5% on sales over £1m and 7% on sales over £2m.
Osborne has made stamp duty more like income tax. Now, the first £125,000 is tax-free, then 2% is levied on the portion up to £250,000, 5% on the portion up to £925,000, 10% on the slice up to £1.5m, and 12% on anything over that. It means a cut of £4500 in tax on the average priced UK home, which now costs £275,000.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article