Every week, Mansion Global poses a tax question to real estate tax attorneys. Here is this week’s question.
Q: Where are some of the highest property taxes in the U.K. and where are some of the lowest?
A: Until three years ago, stamp duty was the same throughout the U.K., according to Richard Loudon, senior property partner at the Edinburgh-based law firm Simpson & Marwick. But now each country within the U.K. can decide how much to charge on property transactions, and Mr. Loudon said the high tax in Scotland means some home buyers there are paying more than in England.
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A change to Scotland’s Land and Buildings Transaction Tax (LBTT) in 2015 slightly reduced taxes at the lower level and increased them for those buying more expensive properties, Mr. Loudon said. The tax is progressive, with five bands of taxes due on the cumulative value of the property.
Therefore buyers are taxed like so:
No tax on the first £145,000 (US$197,205) of the cost of the home 2% tax on the next £105,000 (US$142,803) 5% on the next £75,000 (US$102,002) 10% on the next £425,000 (US$578,014)
Buyers will pay an additional 12% on anything over £750,000 (US$1.02 million), according to the Revenue Scotland website.
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So a £1 million (US$1.36 million) home could end up incurring a tax bill of £78,350 (US $106,600), Mr. Loudon said.
Compare that to the Stamp Duty Land Tax (SDLT) in England and Northern Ireland, which is also a progressive tax, but its tax bands are much wider:
The first £125,000 (US$170,000) is not taxed, but the next £125,000 is taxed at 2% The next £675,000 (US$918,023) up to to £925,000 (US$1.25 million), is taxed at 5% For homes over £925,000, the next £575,000 (US$792,020) up to £1.5 million (US$2.04 million) is taxed at 10%
The remaining amount is taxed at 12%, according to the English government’s website.
So the total SDLT tax due on a £1 million home in England, for example, would be £43,750 (US$59,523).
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As of April 2018, Wales has also adopted its own system, with six purchase price bands for its Land Transaction Tax (LTT):
There is no tax on up to £180,000 (US$244,806) There’s a 3% on the next £70,000 (US$95,205) There’s a 5% on the next £150,000 (US$203,915) 7.5% is taxed on the next £350,000 (US$476,012) 10% is taxed on the next £250,000 (US$340,008)
Then there is a 12% tax on the remaining amount over £1.5 million, according to the Welsh government website.
The total LTT due on a £1 million home in Wales would then be £61,200 (US$83,265).
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