Land and Buildings Transaction Tax
New rates will see 49,000 buyers pay less tax on new homes.
Proposed new tax rates are set to benefit first-time buyers and those at the lower end of the housing market, it was confirmed today.
The rates for the Land and Buildings Transaction Tax (LBTT) – which will replace UK Stamp Duty Land Tax from April 2015 – were announced as part of the Draft Scottish Budget 2015/16.
The tax will be the first to be introduced by the Scottish Parliament in 300 years and will change the way people pay tax on property purchases.
The new rates will only be payable on the portion of the total value which falls within each band. This contrasts with the ‘slab’ structure of stamp duty under which the higher tax rate is payable on the whole purchase price when a threshold is crossed.
The rates will also:
- Take 5,000 additional house purchases out of tax by ensuring that nobody will pay tax on the first £135,000 of their house purchase - £10,000 higher than the current stamp duty threshold;
- Ensure that no tax will be payable on 45 per cent of transactions;
- Reduce the tax charge relative to stamp duty for a further 44,000 house purchases up to £325,000; and
- Ensure that 90 per cent of homebuyers will either pay less or the same amount as they would under current arrangements.
The two devolved taxes will be collected by Revenue Scotland and are expected to bring in an estimated £558 million in 2015-16. Scotland’s block grant will be adjusted to recognise that these tax receipts will flow directly to Holyrood and not to the Treasury in London.
Finance Secretary John Swinney said:
“At the heart of our budget is a strong determination to make Scotland a prosperous and fairer country and the new tax powers give us the opportunity to underpin these values.
“The Land and Buildings Transaction tax is the first tax created by the Scottish Parliament in 300 years. We now have the chance to apply the principles set out by Adam Smith – that there must be certainty, convenience for the taxpayer and efficiency of tax collection and, most relevant to the proposals which I announced today, that taxes should be proportionate to the ability to pay.
“The old stamp duty was outdated - causing unfair tax hikes at set property prices. This led to the market being distorted and led people to try to avoid tax.
“Our proposed residential transaction rates will be more proportionate to the house price, and means that the tax is fairer as it is based more closely on the buyer’s ability to pay.
“The increase in the level before paying tax will also benefit around 5,000 homebuyers a year – helping first time buyers and improving the affordability of starter homes. This new approach will benefit the majority of Scots, 90 per cent of homebuyers will either pay less or the same amount as they would under current arrangements.
“For example, a couple buying their first home for £140,000 will pay £100 under the new system, £1,300 less than the stamp duty charge which applies now. A family buying a new home for £260,000 will pay £3,300 under the new transaction tax – that’s a saving of £4,500 compared to stamp duty.
“New taxation and borrowing powers are a step forward but I believe that the Scottish Parliament should be responsible for the full range of taxes levied in Scotland. This way we can continue to drive forward prosperity and fairness in Scotland for all of our citizens.”
Up to £135,000
£135,001 - £250,000
£250,001 - £1,000,000
A Land and Buildings Transaction Tax calculator is available at: http://www.scotland.gov.uk/Topics/Government/Finance/scottishapproach/lbtt
Revenue Scotland will administer the Land and Buildings Transaction Tax (LBTT) and the Scottish Landfill Tax (SLfT). It will work closely with Registers of Scotland (RoS) to prepare for LBTT and with the Scottish Environment Protection Agency (SEPA) on the replacement for UK Landfill Tax.
The Revenue Scotland and Tax Powers Bill (RSTPB) was passed by the Scottish Parliament on 19 August 2014. This provides for the establishment of Revenue Scotland and Scottish Tax Tribunals; puts in place a general anti-avoidance rule; and makes provision about the collection and management of devolved taxes. Royal Assent was granted in September 2014.
The Scottish Government’s tax forecasts have been reviewed and endorsed as reasonable by the independent Scottish Fiscal Commission.