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“All change” with new Property Tax

Unveiled by Finance Secretary John Sweeney the Land and Buildings Transaction Tax (LBTT) will come into effect on 1st April 2015 replacing the current Stamp Duty Land Tax (SDLT).  The devolved tax will be collected by Revenue Scotland and it is expected that it will bring in an estimated £558 million in 2015/16. 

Currently any property up to £125,000 does not attract any stamp duty payment.  As of April 2015, that tax-free figure will rise to £135,000 for homebuyers in Scotland. If you were to buy a house today between those two figures, you would need to pay 1% stamp duty.  A £130,000 purchase now, for example, would incur a stamp duty payment of £1,300. However, a £130,000 purchase next April will not require any tax payment. This will support many first-time buyers.

For properties priced between £135,000 and £250,000 a marginal tax of 2% LBTT will apply, but only on the value over £135,000.   For example, a house purchased for £200,000 will attract LBTT of £1,300 (2% of £65,000 - the difference between £135,000 and £200,000).  By comparison, purchase a house now at £200,000 and you will pay 1% stamp duty, which would be £2,000.  A difference of £700.

For properties purchased for any sum over £250,000 a marginal tax of 10% would be applied for the value above £250,000.  LBTT is calculated firstly on the amount of tax applied between £135,000 and £250,000 at 2% and 10% on any value over £250,000.  A property purchased for £300,000 post 1st April will attract LBTT of £7,300 (£65,000 x 2% = £1,300) + (£50,000 x 10% = £5,000), a saving of £1,700 on what would be payable under the Stamp Duty Land Tax rules.

A more significant change will become apparent on properties purchased for £325,000 and over, and the more valuable the property prices, the higher the rate of LBTT will be by comparison to the current SDLT rates as the table below shows.

A recent survey by Nationwide Building Society puts the average price for a property in Aberdeen at £263,986 and the Scottish average at £162,000.  Based on these figures, many feel that the new LBTT will offer a boost to First Time Buyers.  Whilst welcome news to first time buyers, the question is, what impact the introduction of the new tax will have on the top end of the property market. 

Purchases costing more than £1m will see the most significant increase in tax after April 2015.   

Under the current SDLT regime, the duty payable on a property worth between £1million and £2m house is 5%, with anything above £2m at 7%.

For any purchase over £1m from April 2015, there will be an additional 12% tax rate.  A £1.5 million  property purchased after the introduction of the LBTT will attract £137,300 in tax.  Bought now, the stamp duty on the same property would be at £75,000.   A £3m property purchased in April 2015 will attract a tax charge of £317,300. The same property being purchased now would attract stamp duty of £210,000 – a difference of £107,300!

We may see a surge of people trying to purchase higher value properties over the next few months before the new tax comes into effect.  This may be good for the property market but it will mean that the revenue (SDLT) generated by these transactions will be payable to the Westminster Government rather than the Scottish Government.  First time buyers, on the other hand, may decide to “hold back” until next Spring to make their move.

PLEASE NOTE THAT THIS INITIAL ANNOUNCEMENT HAS SUBSEQUENTLY BEEN SUPERSEDED BY FURTHER UP-DATES AND CHANGES - PLEASE SEE MORE RECENT ARTICLES ON THIS SITE. 

Purchase Price

Land and Buildings Transaction Tax

Stamp Duty Land Tax

(pre Autumn Statement 2014)

£135,000

0

£1,350

£200,000

£1,300

£2,000

£250,000

£2,300

£2,500

£275,000

£4,800

£8,250

£300,000

£7,300

£9,000

£325,000

£9,800

£9,750

£350,000

£12,300

£10,500

£375,000

£14,800

£11,250

£400,000

£17,300

£12,000

£450,000

£22,300

£13,500

£500,000

£27,300

£15,000

£700,000

£47,300

£28,000

£800,000

£57,300

£32,000

£900,000

£67,300

£36,000

£1,500,000

£137,300

£75,000

£3,000,000

£317,300

£210,000

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