Revised rates for Land and Buildings Transaction Tax (LBTT) in Scotland

Revised rates for Land and Buildings Transaction Tax (LBTT) in Scotland

Published:

Author: Shona White

The Scottish Government has announced revised rates for residential properties under the Land and Buildings Transaction Tax (LBTT), which replaces Stamp Duty Land Tax (SDLT) in respect of land transactions in Scotland with effect from 1 April 2015.

The Scottish Government previously released its proposed LBTT rates in October last year, and Shoosmiths' published an overview of the LBTT system and original proposed rates. However, the announcement of new SDLT rates in December by the Chancellor led to pressure on the Scottish Government to amend the LBTT rates in respect of residential properties to more closely mirror those of SDLT.

LBTT had already established the principle, followed by the new SDLT rates, of charging different rates across portions of the price. This remains under the new rates, but there are three principal changes to the rates bands set-up:

  • The threshold at which LBTT becomes payable is increased from £135,000 to £145,000
  • A new 5% band is introduced for that portion of the price between £250,000.01 and £325,000 
  • The threshold for the top band of 12% is lowered from £1,000,000 to £750,000

The new residential LBTT rates are therefore as follows:

Price LBTT rate
Up to £145,000 0%
£145,000 -  £250,000 2%
£250,000.01 - £325,000 5%
325,000.01 to £750,000 10%
Over £750,000 12%

The new LBTT rates, as compared against the new SDLT rates, mean that for sales up to the value of approximately £330,000 purchasers will pay less in Scotland than they would do south of the border. Above this level, LBTT becomes the more expensive tax. However, compared against the previously announced LBTT levels, purchases for less than approximately £1,000,000 will now incur less LBTT liability than they would have done.

The new rates therefore represent an improvement for purchasers in Scotland as against the previously announced rates, but purchasers over the £330,000 mark may still feel hard done by in comparison to purchasers south of the border. This is particularly likely to be problematic in Edinburgh and Aberdeen where house prices vastly exceed the nationwide average.

Overall the revised rates have received a positive reception thus far; it remains to be seen what, if any, impact they have on the property market.

Disclaimer

This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.