Note that the Scottish Government announced new rates of Land and Buildings Transaction Tax (LBTT) on 21 January 2015. For the most up-to-date position, as of 23 January 2015, please look at: http://www.mov8realestate.com/2015/01/changes-lbtt-rates-april/
As if there hasn’t been enough confusion about old Stamp Duty, new Stamp Duty (an overnight change), LBTT replacing new Stamp Duty for property purchases settling on or after 1 April 2015, it looks like the rates for Land and Buildings Transaction Tax (LBTT) are due to change again.
The good news for property buyers in Scotland is that it looks like it will result in a reduction in the amount of tax payable under LBTT, bringing it in line with the UK Chancellor’s pre-election gift to property buyers that took place in early December 2014. Broadly speaking, this will mean that most people will pay less tax on a purchase.
Whilst most buyers would have been better-off under the new LBTT scheme rather than the old Stamp Duty scheme, people buying more expensive houses were disproportionately hit by higher taxes on the purchase leading some to fear that it would have a significant and negative effect on the property market at the higher end. Whilst few tears would have been shed by most people about someone paying more tax on the purchase of a £1 million property, there were genuine fears that this would have a ripple effect that would harm the rest of the market.
With changes to the UK Stamp Duty taking place from December 2014, the effect was that Scottish property buyers would end up paying significantly more purchase tax to the Scottish government from 1 April 2015 than buyers in the rest of the UK would pay, from around £254,000 upwards. The further you went over that threshold, the more marked that difference would have been. Naturally, there would have been fears that people would be more likely to locate themselves in England rather than Scotland if it was more affordable to buy a property of the same value.
So what is the likely effect of all of this on you if you are a property buyer or seller in Scotland?
It has yet to be seen what the new LBTT rates will be. However, the net effect is likely to be that, if it is brought more in line with the new UK Stamp Duty rates, there will be less of a surge of activity in the higher end of the market as a result of property buyers trying to take advantage of the last few months of the UK Stamp Duty regime before it switches over to LBTT for settlements taking place on or after 1 April 2015. It also means there is less likely to be a dip in activity in the market from 1 April, at least at the £250,000-plus end of the market, whilst buyers save-up and adjust to having to pay more property purchase tax overnight.
For more details, have a look at this article from The Scotsman – http://m.scotsman.com/news/politics/top-stories/swinney-forced-into-rethink-on-new-property-tax-1-3664752