The Scottish Finance Secretary announced the rates at which Land and Buildings Transaction Tax Scotland will be charged. The New Land and Buildings Transaction Tax Scotland (LBTT), which replaces Stamp Duty (the lump-sum tax that anyone buying a property worth more than a certain amount is required to pay) for house purchases in Scotland from April 2015, will be charged at 2 per cent of the purchase price between £135,000 and £250,000, 10 per cent between £250,001 and £1million and 12 per cent on anything paid above that. No tax will be paid on properties purchased under £135,000.
Buying property up to £135,000
Under Stamp Duty any property purchase up to £125,000 is not liable for any tax payment. As of April 2015, that tax-free threshold will rise to £135,000. If you were to buy a house before LBTT between those two figures, you would need to pay 1% Stamp Duty on the purchase price. So, a £130,000 purchase, for example, would require a Stamp Duty payment of £1,300.
Buying property between £135,001 and £250,000
Under LBTT a 2% tax rate will apply to the portion of the purchase price between £135,001 and £250,000.
For example, a house bought at £200,000 under LBTT would require a payment of 2% on £65,000 (the difference between £200,000 and £135,000). This would be £1,300. This represents a saving of £700 from the payment under Stamp Duty 1% of the purchase price = £2,000).
A purchase of £136,000 shows significant savings under the new regime - Under LBTT a tax payment of £20 would be required, compared to £1,360 under Stamp Duty.
Buying property between £250,001 and £1million
A property purchased at £300,000 under LBTT would require a £7,300 tax payment (0% of £135,000, 2% of £115,000 and 10% of £50,000). Stamp duty for a house at this price is 3% of the purchase price, being £9,000.
The balance shifts once the purchase price is higher than £324,000. Above this, buyers will be required to pay more tax under LBTT compared to Stamp Duty.
For example, at £325,000 the tax due under LBTT would be £9,800, compared to £9,750 under Stamp Duty. A purchase of £750,000 the tax due would be £52,300 under LBTT, whereas £30,000 Stamp Duty Tax would be required.
Buying property over £1million
For the fortunate enough to be in a position of purchasing property costing more than £1million, the tax required under LBTT will be significantly higher.
A property worth £1.5m would cost £137,000 in tax under LBTT, whereas Stamp Duty would be £75,000.? For a £3m mansion, LBTT would be £317,000 compared to Stamp Duty of £210,000.
For more information or advice on buying a property and the Land and Buildings Transaction Tax Scotland please get in touch with our team.
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