FIRST-TIME buyers are to cash in after the Scottish Government slashed the tax on house purchases at the lower end of the market while increasing charges on more expensive properties.
Finance Secretary John Swinney promised a fairer deal for house buyers as he announced details of the Land and Buildings Transaction Tax, which will replace stamp duty from April 1 next year.
The new tax, which also covers commercial property deals, is the first tax to be set at Holyrood and the first national tax levied in Scotland since 1706.
Details of a new landfill tax, also devolved under the 2012 Scotland Act, were announced by Mr Swinney as part of his Budget for the coming financial year.
The Land and Buildings Transaction Tax (LBTT) will sweep away stamp duty, under which house buyers paid one per cent of the property value on sales over £125,000, three per cent on sales over £250,000 and four per cent on sales over £500,000, with higher rates for homes more than £1 million and £2m.
Under the new rates, buyers will not be taxed on sales below £135,000. Thereafter they will pay two per cent up to £250,000, 10 per cent up to £1m and 12 per cent over £1m.
Unlike stamp duty, the rates will be paid only on the portion of the value within each band, so tax on a £140,000 home would be two per cent of £5,000, or £100.
Tax on a £162,000 home - the average price in Scotland - will be £540, against £1620 stamp duty.
However, people buying homes costing more £325,000 will pay more than before.
Tax on a £450,000 home will be £22,300, against stamp duty of £13,500.
People buying a £1 million home will pay £77,300, nearly double the present rate of £40,000.
Mr Swinney said 90 per cent of sales would attract the same or a lower tax bill.
The Scottish Government expects LBTT to raise the same amount of money as stamp duty overall - £295m on residential property - and predicts the number of house sales will remain the same at about 100,000 per year.
Mr Swinney denied he had imposed a mansion tax, but said: "Our proposed residential rates will be more proportionate to the house price and means the tax is fairer as it is based more closely on the buyer's ability to pay."
MSP Gavin Brown, finance spokesman for the MSP Scottish Conservatives, said: "This is not a mansion tax, it's not just going to hit the wealthy, it's also a suburbs tax that will impact many ordinary middle class families. This is an assault on aspiration."
He questioned the "eye-watering" 10 per cent tax on houses over the value of £250,000.
"There are pockets of this country, such as Edinburgh, where family homes for hard-working families are considerably in excess of that," he said.
"We all understand it increases as houses go up, but a 10 per cent I think is difficult to justify."
But Mr Swinney responded: "Average property prices in Scotland are significantly below the threshold at which individuals would have to pay more under the proposals I have set out than would be the case under the current proposals. So I think the judgments that have been made are fair judgments."
The new taxes are expected to raise £558m, including £117m from landfill charges, but will be accompanied by a cut in the Scottish Government's block grant from Westminster.
Labour MSP Iain Gray welcomed the move to make the replacement stamp duty tax more related to property costs, while Scottish Liberal Democrats' leader Willie Rennie said he welcomed the "progressive nature of the taxes … based on the ability to pay".
In his annual statement to MSPs, Mr Swinney said his £30 billion spending plan was "a Budget for fairness and opportunity".
He said: "As we move from recession to recovery it is essential the benefits of economic growth are shared by everyone across Scotland."
He announced an extra £86m for the NHS, bringing its total budget to more than £12bn for the first time, following Conservative and Labour claims the SNP had failed protect health spending in Scotland.
He also unveiled details of a £1bn building programme first announced in April and funded by the Scottish Government's version of the Public Private Partnership (PPP) programme, known as Non Profit Distributing, or NPD.
One-third of the cash will go on new schools and a further £140m on two college campuses.
NHS facilities will receive a £400m boost and £60m will be made available for up to three new court centres.
Mr Swinney also raided enterprise budgets to provide an extra £125m for building affordable homes, taking total housing investment to £390m.
The move was welcomed by Homes For Scotland, which represents house builders, and the Scottish Federation of Housing Associations. But Graeme Brown, director of Shelter Scotland, said the target to build 4000 social rented homes was "a missed opportunity".
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