LBTT Scotland, what you need to know about Stamp Duty

With the latest announcement that there will be changes to the tax paid on properties sold north of the Border, we look into how this could help you.

Prior to today's announcement

To quickly recap, in October the Scottish Government announced proposed bands for Land & Buildings Transaction Tax (LBTT) which would replace Stamp Duty Land Tax in Scotland from April 2015. This was quickly followed in December when immediate changes to SDLT were announced as part of the Autumn Statement from the UK Government.

In light of the changes in the Autumn Statement, on 21 January 2015 the Scottish Government announced changes to the proposed LBTT bands which will take effect from 1 April 2015.

What has changed?

The changes announced in the Autumn Statement essentially amounted to a reduction in the total tax collected via SDLT allowing the Scottish Government to make a similar reduction in the total tax collected through LBTT. Below are the bands that were originally proposed for LBTT back in October 2014:

£0 to £135,000 - No tax

£135,001 to £250,000 - 2%

£250,001 to £1,000,000 - 10%

Over £1,000,000 - 12%

In each case the tax was only paid on the portion over each threshold. So, for example if a property is bought for £150,000, under the proposed LBTT system will only be applied on the part of the selling price over £135,000.

That is, the buyer will pay 2% of £15,000 leading to a tax bill of £300. Following today’s announcement, the bands for LBTT are now proposed as:

£0 to £145,000 - No tax

£145,001 to £250,000 - 2%

£250,001 to £325,000 - 5%

£325,001 to £750,000 - 10%

Over £750,000 - 12%

These bands will be introduced from 1 April 2015. Again, the tax will only apply to the portion of the selling price above each threshold. Essentially the lowest threshold has been raised from £135,000 to £145,000 meaning more people will pay no tax at all, and the tax paid on properties between £250,000 and £325,000 has been lowered from 10% to 5%. The threshold for the highest tax rate has come down, however, from £1million to £750,000.

Calculators

Use our ESPC LBTT Calculator to work out how much you could be tax you could be paying.

Who wins and loses?

If we compare the new LBTT to what was previously proposed, everyone buying a home for less than £948,000 will pay less tax, whilst everyone buying a home for more than that amount will pay more.

If we compare the newly proposed rates of LBTT with current levels of Stamp Duty, the situation is a little different. In summary:

• Everyone buying a home for less than £125,000 will be unaffected. They pay no tax under SDLT or LBTT.
• Anyone buying a home for between £125,000 and £333,000 will pay less tax under the new LBTT bands than is currently the case with SDLT.
• Everyone buying a home for more than £333,000 will pay more tax under the new LBTT from April than they do under SDLT today.

To put this in context, in Edinburgh this means roughly 85% of buyers will be unaffected or better off under LBTT, whilst 15% will pay more. The changes are therefore likely to be welcomed by the vast majority, though it should be noted that for some the additional tax burden come April will be significant. If you’re buying a home for £400,000 in Scotland today you’d pay £3,350 less in tax than would be the case after LBTT is introduced in April this year.

As always, keep up to date with these changes by checking ESPC's news section regularly.