Mackay adds to second home LBTT and refuses tax threshold rise

Purchasers of second homes in Scotland will pay an additional 4%, rather than 3%, in land and buildings transaction tax from 25 January 2019, Finance Secretary Derek Mackay announced in his budget yesterday. The move, which also affects those who invest in buy-to-let properties as well as (temporarily at least) those who buy their next house before they sell their present one, counters but with wider effect a 1% stamp duty land tax surcharge south of the border for purchases of residential property by non-residents.

Mr Mackay also declined to raise the higher rate income tax threshold from its present level of £43,430, in response to the increase to £50,000 announced by the Chancellor, meaning that Scottish taxpayers will be charged at 41% on income between those levels compared with 20% in the rest of the UK – plus a further 12% in national insurance contributions. The Cabinet Secretary said it was "not the time to cut tax for the highest earners at the expense of public services". The tax rates applied to the different bands remain unchanged. 

Also on LBTT, the rates for non-residential property become more differentiated, with the lower rate reduced from 3% to 1% while the higher rate – which will apply above £250,000 rather than the present £300,000 – rises from 4.5% to 5%.

Non-domestic rates will rise at less per pound than the rate of inflation, giving a lower poundage than in the rest of the UK.