As we have discussed in recent blogs, Stamp Duty Land Tax (SDLT) on the purchase of property is to be replaced in Scotland by the new Land and Buildings Transaction Tax (LBTT). The change is due to come into force on 1st April 2015. So what will this land and buildings transaction tax update mean for purchasers?

The Scottish Finance Secretary John Swinney announced amended the proposed rates at which LBTT will be charged from those originally proposed in October 2014.

The threshold for paying tax on a property purchase has been raised again to £145,000 meaning no LBTT would be due on any purchase under this value. The original proposals increased the threshold from £125,000 under stamp duty to £135,000.

The new LBTT will now be charged at 2 per cent of the purchase price between £145,000 and £250,000, 5 per cent between £250,001 and £325,000, 10 per cent between £325,001 and £750,000 and 12 per cent on anything paid above that.

By way of example, imagine you are purchasing a new home for £350,000.00. The tax liability under the old and new SDLT systems, and the future LBTT system, would be markedly different:-

Old UK SDLT Regime

Property in £250,000 - £500,000 band @ rate of 3%
TOTAL SDLT LIABILITY = 3% X £350,000 = £10,500

New UK SDLT Regime

First £125,000 @ 0% = £0
£125,000- £250,000 @ 2% (=£125,000 @ 2%) = £2,500
£250,000- £350,000 @ 5% (=£100,000 @ 5%) = £5,000
TOTAL SDLT LIABILITY = £7,500

Old LBTT Proposals

First £135,000 @ 0% = £0
£135,000- £250,000 @ 2% (=£115,000 @ 2%) = £2,300
£250,000- £350,000 @ 10% (=£100,000 @ 10%) = £10,000
TOTAL LBTT LIABILITY = £12,300

New LBTT Proposals

First £145,000 @ 0% = £0
£145,000- £250,000 @ 2% (=£105,000 @ 2%) = £2,100
£250,000- £325,000 @ 5% (=£75,000@ 5%) = £3,750

£325,000- £350,000 @ 10% (=£25,000 @10%) = £2,500
TOTAL LBTT LIABILITY = £8,350

For more information or advice, please get in touch with our property team.