We thought it would be a good time to provide a little bit of information about Land and Buildings Transaction Tax (LBTT) in the wake of the recent threshold increase.
LBTT is applied to residential and non-residential land and buildings transactions (including commercial leases). For the purposes of this post I will focus on residential property purchases.
LBTT replaced Stamp Duty Land Tax in Scotland in April 2015. The tax is payable at different rates on each portion of the purchase price within specified tax bands.
Prior to Finance Secretary Kate Forbes’ announcement on the 9th of July, the rates and bands were as below, they will revert to the same come the 31st March 2021:
|Purchase Price:||LBTT Rate:|
|Up to £145,000||0%|
|£145,000 to £250,000||2%|
|£250,000 to £325,000||5%|
|£325,000 to £750,000||10%|
If, like myself, you struggle with the mental arithmetic then Revenue Scotland have a very useful LBTT calculator.
Additional Dwelling Supplement (ADS):
Introduced in April 2016 and later increased in January 2019, ADS is charged at 4% which is payable on the total purchase price of the dwelling. The idea is to protect first-time buyers as much as possible.
Importantly ADS does not apply where you are changing a main residence. For example, if you own a main residence and three buy-to-lets, but decide that you want to sell your current main residence and purchase a new main residence, ADS would not apply. In an instance where you own a main residence and are purchasing a buy-to-let, ADS will apply.
First Time Buyer LBTT Relief:
Since June 2018, first-time buyers in Scotland have benefited from a relief on LBTT. This relief raises the starting threshold for first-time buyers from £145,000 to £175,000.
The threshold has now been moved for the introduction of LBTT from £145,000 to £250,000. All percentiles thereafter remain the same as the table above. The revised rates apply to all transactions where the settlement date is between the 15th July 2020 and 31st March 2021.
Where ADS applies, the change to the starting threshold will also apply to those transactions. However, the surcharge of 4% will remain payable at 4% of the total purchase price.
For first-time buyers, this increase of the starting threshold is greater than that provided buyer first-time buyer relief. This means that the relief will have no practical effect during the temporary period up to 31 March 2021.
Please be aware that as an estate agency we cannot take responsibility for charges applicable to you. This information has been gathered and carefully compiled for your benefit. Where any uncertainty remains I would recommend contacting Revenue Scotland.
If you do have any further questions or opinions then please don’t hesitate to get in touch via firstname.lastname@example.org