Propertymark has warned plans for a Scottish “mansion tax” could make it harder for people to move home and has called for a wider review of property taxation instead.

The Scottish Government is consulting on two new council tax bands covering properties valued at more than £1 million and £2 million.

Illustrative figures suggest homes falling into the proposed Band I could face annual council tax of around £4,770, while Band J properties could pay approximately £7,650.

But Propertymark argued the proposals risk adding another layer of taxation to the housing market and said ministers should also examine Land and Buildings Transaction Tax (LBTT) and the Additional Dwelling Supplement.

‘DIRECT IMPACT’ ON MOVING HOME

Hazel MacIver, policy and campaigns officer at Propertymark, said: “Property taxation has a direct impact on people’s ability to move home.

“If the Scottish Government wants to improve housing-market activity, it needs to look at the tax system as a whole rather than introducing another layer of taxation onto an already complex system.

“Adding two council tax bands to a system that is still based on property values from 1991 risks being little more than tinkering with a system that is in need of fundamental reform.”

Around 15,000 of Scotland’s approximately 2.7 million residential properties are expected to fall into the two proposed bands.

The Scottish Government estimates they could generate an additional £12 million to £16 million, before administration costs, appeals and potential payment deferrals.

VALUATION CHALLENGE

Propertymark also raised concerns about how £1 million-plus homes would be identified and valued, particularly where properties are unique or have not changed hands for decades.

It warned automated valuation methods may be less reliable at the top of the market and that physical inspections could be required.

MacIver said: “Valuing a £1 million-plus property is not always straightforward. These homes can be unique, may not have been sold for decades and can differ significantly from one another.

“The Scottish Government must have confidence that valuations are accurate and that there are sufficient qualified assessors to carry out the work. Otherwise, we risk a significant increase in appeals, delays and uncertainty for homeowners.”

LBTT UNDER SCRUTINY

Propertymark said the Government should consider measures that encourage housing market activity, including reviewing LBTT and the Additional Dwelling Supplement.

It cited analysis from Propertymark member Rettie suggesting around 500 sales of properties worth more than £1 million in Scotland last year generated approximately £65 million in LBTT revenue.

That represented around 9% of total LBTT receipts despite accounting for just 0.5% of transactions.

Propertymark also warned higher council tax bills could particularly affect older homeowners whose properties have risen substantially in value but whose incomes have not kept pace, potentially creating another barrier to downsizing.

‘FUNDAMENTAL REFORM’

MacIver added: “The Scottish Government has an opportunity to look at property taxation strategically and consider how it can support people to move into the right homes, improve housing quality and stimulate economic activity.

“We are asking the Scottish Government to engage further with the property sector and to consider these proposals alongside wider council tax reform and revaluation, rather than adding further complexity to a system that already needs fundamental reform.”