New rates for Land & Buildings Transaction Tax in Scotland

17 October 2014

The announcement last week by John Swinney MSP on the rates for the new Land and Buildings Transaction Tax created mild excitement in our Scottish offices. We accountants do not get excited too often.  It is the first time the Scottish Parliament has introduced a new tax.  The first time tax rates will differ from the rest of the UK.

The new tax rates will replace stamp duty and will boost the lower end of the property market in Scotland when introduced next year.

From 1st April 2015, a home buyer making a transaction of up to £135,000 will pay nothing, while a residential property of up to £250,000 will incur a two per cent fee, under the new Land and Buildings Transaction Tax (LBTT).

The west of Scotland, where sale prices averaged £126,000, and the average Scottish home buyer (£160,000) should benefit from the abolition of stamp duty. But, many buyers in Aberdeen and Edinburgh, where the average price is around £225,000, could be hit with a 10 per cent tax rate.

The point at which the tax will become more expensive than stamp duty will be £325,000. Higher end home-buyers, including executives in the financial services and oil and gas sectors, could easily reach the 10 per cent or even the 12 per cent bracket which is triggered at £1 million.

For non-residential property, the new rates will be zero per cent up to £150,000, three per cent to £350,000 and four and a half per cent thereafter.

The introduction of the LBTT is likely to have a mixed reaction.  First time buyers will find it gives them added leverage, while those in the higher brackets will understandably find it a burden.  This is complicated by the disparity in average house prices in Aberdeen and Edinburgh when compared with Glasgow and Lanarkshire.

For those investing in property, whether residential or commercial, there is a decision to be made; is it better to buy or sell before or after 1st April next year?  This depends on the size of the deal.

If you would more information about the new tax rates, please contact one of our tax advisers at our offices in Glasgow, Aberdeen, Perth or Stirling, or complete our  contact form.