Stamp Duty

Could you save thousands in Land and Buildings Transaction Tax costs?

On Thursday 9^th July, Finance Secretary Kate Forbes announced measures to boost the Scottish economy by raising the threshold for Land and Buildings Transaction Tax (LBTT) to £250,000. This means if you’re purchasing a home in Scotland for under this threshold, you’ll now pay absolutely nothing in Land and Buildings Transaction Tax.

This amendment will mean 8 in 10 house buyers in Scotland will not pay LBTT. Landlords and buyers of additional properties, such as second homes and buy-to-let properties, will also benefit from this tax cut which will remain in place until 31^st March 2021. 

So, what does this mean for you?

Here’s everything you need to know about Land and Buildings Transaction Tax and the new changes.

What is Land and Buildings Transaction Tax?

Land and Buildings Transaction Tax (LBTT) is the tax that must be paid when you purchase a property or a piece of land. It is administered by Revenue Scotland, with support from Registers of Scotland.

LBTT replaced UK Stamp Duty Land Tax in Scotland on 1 April 2015.

Similar to Stamp Duty, the amount of money required depends on the overall price of the property as well as factors like whether it is residential or non-residential and whether or not you are a First Time Buyer or purchasing an additional dwelling.

How much would you usually pay?

The threshold for Land and Buildings Transaction Tax (LBTT) is currently £145,000. If the property is worth between £145,000 and £250,000, the LBTT tax rate is 2%. From £250,000 to £325,000 the rate sits at 5% and a further 10% between £325,000 and £750,000.

The average new-build home in Scotland currently costs around £225,000, so you would previously have has to pay an extra £1,600 in tax. Under these new tax changes, there will be absolutely no LBTT tax to pay on homes up to £250,000, including new builds.

Benefits if you’re buying a home

These new changes mean you could save thousands in tax costs on your new property purchase. If, for example, you were purchasing in an area where the average house price is £250,000 you could save a whopping £2,100 in LBTT tax costs by purchasing now, whilst the tax cut is in place.

If you take a look at the table below, you can see the difference these tax changes will make to your main home purchase.

Benefits if you’re selling a home

If buyers are saving thousands in tax costs on the prices of their homes, they are more likely to pay your asking price. Equally, when you come to purchase a new main home, you would usually have paid a higher level of LBTT tax as you’re not a First Time buyer. However, under these new tax changes, you could find yourself saving a tidy lump sum.

Benefits if you’re a landlord or buying a second home

There’s also great news for landlords and those of you purchasing a second or additional property. Where previously there would have been the higher buying tax rate of ‘Additional Dwelling Supplement’ plus an additional 4% tax fee, now anyone looking to purchase will only have to pay 4% tax up to £250,000. For this reason, buying property will now be cheaper for landlords.

So, what’s next?

The change was introduced on 15^th July 2020 and will remain in force until 31 March 2021.

Who knows when there will be an opportunity to save on Land and Buildings Transaction Tax like this again? The tax change is designed to give the Scottish economy a shot in the arm and, at the same time, it brings with it the opportunity for buyers to save hundreds, if not thousands.

Now is a brilliant time to move and make these savings.