Budget: Property tax reformed but council tax stays frozen

Housing related tax was the focus of today’s Scottish budget plan from Finance Secretary John Swinney.

Stamp duty is to be replaced by a new Land and Building Transactions Tax, which will see properties worth less than £135,000 bought tax free, a marginal tax of 2 per cent on purchases between £135,000 and £250,000, and a 10 per cent rate applying to those between £250,000 and £1m. Properties over £1m will be taxed at 12 per cent.

It is the first time the Scottish Parliament has levied its own taxation since the Union of 1707. "In exercising its first judgements on national taxes, this government has put fairness, equity and the ability to pay at the heart of what it has done," Swinney said.

The council tax is to remain frozen, a decision which was met with criticism from opposition and unions. Green MSP Patrick Harvie said it was time for the government to stop avoiding the issue of council funding.

"There is talk today of a historic moment as new tax rates are set, and yet the one major tax we've had control of since 1999 is Council Tax, which remains unfair and unreformed. It is no longer credible for the Scottish Government to dodge the debate about how we empower local government and fairly fund its services,” he said.

Scottish Trades Union Congress (STUC) General Secretary, Grahame Smith, said: “We are pleased that John Swinney’s first use of tax powers is in a progressive direction, but by far the most important announcement is of the review of local taxation.  The Council Tax freeze becomes more damaging to service provision every year it continues and we need an all-party commitment to reform.”

Funding to mitigate Westminster welfare reforms will be maintained at £81m.

Other features of the budget included an increase in health spending to over £12bn for the first time, extending childcare to 600 hours and investment of £390m in affordable homes. Capital investment in schools and colleges will be made through the non-profit distribution model (NPD) which replaced PFI.

Swinney said his budget “demonstrates the values and priorities of the Scottish Government. We drive forward investment in our economy, we protect our NHS, we invest in our young people and businesses and we protect the most vulnerable."

Shadow Finance Secretary Iain Gray welcomed the more graduated replacement to Stamp duty, but said health spending had “not kept pace” with the health allocation in England. “The Scottish Government have yet again failed to deliver a fully progressive budget, failed to tackle the underfunding of local government and failed to address the swingeing cuts to college budgets,” he said.