The Scottish government has launched a consultation proposing significant increases to council tax for properties valued at over £1 million. Under the new plan, homes with an open market value between £1 million and £2 million could face an average annual council tax bill of £4,770, an increase of approximately £720. Properties valued above £2 million could see their bills rise to an average of £7,650, an increase of around £3,600 compared to current Band H rates.
These proposed changes, aimed at introducing new council tax bands 'I' and 'J', are expected to affect an estimated 15,000 properties. The Scottish government projects that these new bands would generate an additional £12 million to £16 million annually for local authorities. This revenue is intended to support local services. Finance Secretary Jenny Gilruth stated that the proposal seeks to ensure Scotland's wealthiest individuals contribute more, arguing that some multi-million pound properties currently have council tax bills not significantly different from those on more modest homes.
However, critics, including Scottish Conservative finance spokesman Craig Hoy, have raised concerns that the proposed tax hikes could negatively impact Scotland's property market and wider economy. Hoy suggested the revenue generated might not justify the administrative costs and warned that punitive rates could deter investment and property purchases. He also highlighted the potential for the tax to affect individuals who are asset-rich but cash-poor, such as pensioners living in family homes.
Real estate professionals echoed these concerns. Steven Currie, director of residential sales, lettings, and investments at Murray & Currie, noted that rising living costs combined with increased property taxes might lead owners to reconsider their residency in Scotland. He suggested that the proposed taxes could create a perceived price ceiling around the £2 million mark, potentially impacting aspirational buyers and having a ripple effect on local businesses like shops, restaurants, and bars.
The properties subject to the new bands will be assessed by Scottish Assessors using recent comparable sales data and market evidence, a method that differs from the 1991 property values used for council tax bands A-H. Scotland already has higher income tax rates than the rest of the UK for earnings above £33,493 and higher land and buildings transaction tax charges. The consultation period for these proposals will conclude on August 24.