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Change expected in Scottish property tax plan New Scottish property tax rates cut
(about 15 hours later)
Finance Secretary John Swinney is expected to confirm later that he is to reduce proposed new tax rates on Scottish property purchases. The proposed new tax rates on Scottish property purchases have been cut - although people buying the most expensive homes will have to pay more.
Since he announced his tax plans, UK Chancellor George Osborne introduced a new system for the rest of the UK. Deputy First Minister John Swinney said nobody would pay tax on properties costing less than £145,000, after raising the threshold.
It resulted in properties at the higher end of the market attracting a lower rate of tax than the proposed Scottish system. He said a 12% marginal rate would now apply to people buying houses costing more than £750,000, rather than £1m.
The changes in Scotland are due to come into effect in April. The new tax replaces stamp duty in Scotland from April.
Mr Swinney's initial plans raised the threshold for paying tax on a home from £125,000 under stamp duty to £135,000, with rates ranging from 2% up to 12% on the portion of any price above £1m. Mr Swinney told parliament the revised bands were proportionate and based on the ability to pay.
Earlier this week, Mr Swinney told BBC Scotland: "I did not intend to raise more tax than the tax I was replacing or to cut tax. His original plans, announced last October, raised the threshold for paying tax on a home from £125,000 under stamp duty to £135,000, with rates ranging from 2% up to 12% on the portion of any price above £1m.
"The consequence of the Chancellor's announcement in December is the amount of tax that he intends to raise from this has reduced quite significantly. Chancellor George Osborne has since introduced a new system for the rest of the UK, resulting in properties at the higher end of the market attracting a lower rate of tax than the proposed Scottish system.
"So, if I want to remain true to my principle of this change being revenue neutral - that it doesn't increase or lower the taxes that are generated - then the right thing to do is to look at these issues." Mr Swinney told parliament his revisions to the Land and Building Transaction Tax meant half of all household purchases would be tax-free, while more than 40,000 buyers would pay less.
Much of the criticism from Mr Swinney's political opponents has focussed on the 10% rate being levied on properties costing more than £250,000. He said: "The measures I am proposing today send a very clear message.
Conservative finance spokesman Gavin Brown said: "The eye-watering 10% tax rate has caused concern in many parts of Scotland and is having a distortion on the housing market. "This government has put fairness, equity and the ability to pay at the very heart of the decisions that we have taken."
"There is a clear and obvious way to fix this distortion - the Scottish government can use the windfall from UK stamp duty changes to create more realistic tax rates with a shallower increase." The changes came as MSPs debated the Scottish government's budget plans for the year ahead, worth more than £30bn.
Parliament is expected to back the spending proposals in principle.