From 1st April 2015, Stamp Duty Land Tax (SDLT) will cease to apply to transactions involving land and property in Scotland, and will be replaced by the Land & Buildings Transaction Tax (LBTT).
The Land & Buildings Transaction Tax (Scotland) Act 2013 was passed in July 2013, although it has taken until the post-referendum Budget of 9th October 2014, before rates and thresholds were announced. The Finance Secretary, John Swinney, detailed the first Scottish tax rates in more than 300 years in his Budget Plan for 2015 – 16.
SDLT is referred to as a slab tax, and the whole of the price is taxed at the same rate. LBTT is to be a progressive tax, and slices of the price will be charged at different rates, in a similar way to Income Tax.
There are different rates and thresholds for residential and non-residential property. This article focuses on the residential position, and our Commercial team provide further details on the non-residential position.
Current SDLT Rates (for residential land or property) – which will generally apply to transactions completing by 31st March 2015
| Purchase price |
SDLT rate (payable on whole price) |
| Up to £125,000 |
0 |
| Over £125,000 to £250,000 |
1% |
| Over £250,000 to £500,000 |
3% |
| Over £500,000 to £1 million |
4% |
| Over £1 million to £2 million |
5% |
| Over £2 million |
7% |
New LBTT rates & thresholds – from 1st April 2015
| Purchase price |
LBTT rate |
| Up to £135,000 |
0 |
| Over £135,000 to £250,000 |
2% |
| Over £250,000 to £1 million |
10% |
| Over £1 million |
12% |
With LBTT being a “progressive” tax, it is hoped that the new system will be fairer, as it will be more related to the value of the property. The structure of the new tax is designed to remove the distortions in house prices associated with bunching of sales around the current thresholds of SDLT, and has been presented by the Scottish Government as a help to first-time buyers.
With a threshold of £135,000 for LBTT, up from the SDLT level of £125,000, anyone purchasing a property up to this price will have no tax to pay, and so this indeed will be welcomed. In fact, anyone purchasing a property up to £324,300 will be better off, but above this level the gap between the current SDLT payments and the sums of LBTT due starts to widen.
For example, if someone buys a house for £500,000 then SDLT of £15,000 is due. From 1st April 2015 the amount of tax to be paid would increase to £27,300.
Whilst there may be little public sympathy for the extra tax due by someone who is able to purchase a property at that level, there is no doubt it is a substantial increase and may have some effect on the higher priced end of the market – either by restricting sales or reducing prices, with buyers perhaps looking to pass on any additional tax to a seller by reducing any offer price.
However, bearing in mind that the average residential property price in Scotland is £162,122 (June 2014 – Registers of Scotland) then there will be certainly be many more winners than losers. Indeed, the Scottish Government have estimated that 90% of homebuyers would either pay less or the same amount of tax as they would do under the current arrangements, and such savings will be a welcome boost for the homebuyer in Scotland.
