Scotland to cut Land and Buildings Transaction Tax
Land and Buildings Transaction Tax (LBTT) is a tax that you usually have to pay when buying a property in Scotland. It’s a tiered tax, meaning you pay different rates on different portions of the property price. Until 2015 those purchasing properties in Scotland had to pay stamp duty, but this is devolved and was replaced with LBTT on 1 April 2015.
As a result of the Government lockdown in March, the property market ground to a halt with transactions unable to conclude. People were unable to view properties personally and Estate Agents were unable to trade only reopening during “Phase 2” of the easing of Governments lockdown restrictions in June.
To assist in the economic recovery from the COVID-19 crisis the Government has announced that from 15 July 2020 the threshold for Land and Buildings Transaction Tax (LBTT) to be paid for residential property purchases will increase from £145,000 to £250,000. This increase will remain in place until 31 March 2021, in line with the changes in England and Northern Ireland.
The Finance Secretary Kate Forbes MSP has stated that 80% of home buyers will now have no LBTT charges. Additionally, any person purchasing a property with a value over £250,000 will save up to £2,100.
Since 30 June 2018, first-time buyers in Scotland have benefited from a relief on LBTT. The new relief effectively raises the starting threshold for first-time buyers from £145,000 to £175,000 and is intended as a boost for the property sector. The temporary relief will undoubtedly stimulate the property market, which will in turn help strengthen the economy as we navigate our way out of lockdown. It will encourage more people to put their homes on the market, even beyond the normal seasonal window.
The advantage is that first-time buyers (all buyers in Scotland) will save up to £2,100 on the increased threshold.
As well as raising the starting threshold for LBTT, the Scottish government is injecting £50m into the First Home Fund, which provides first time buyers with up to £25,000 to buy a property. Forbes said this will help an estimated 2,000 first time purchases.
Timing of Completion
Like with everything there is a ‘but’.
If your property transaction completed (typically coinciding with the day you receive the keys) prior to 15 July 2020 then you won’t benefit from the increase in threshold.
This may have led to your solicitor advising you to push your completion date back until the Scottish Government made their announcement and it has been our advice to clients here at Pomphrey’s. Since the Scottish Government announcement we have been delighted to update our clients with the news of the savings to their LBTT bill.
If you have any queries regarding the changes in the regulations or guidance on purchasing a property, please contact firstname.lastname@example.org or give us a call on 01698 373365 and we will be happy to assist.