Scotland to cut Land and Buildings Transaction Tax
13 Jul 2020
13 Jul 2020
The threshold at which LBTT begins to be paid will rise from £145,000 to £250,000 on 15 July and remain in place until 31 March 2021, the same deadline as the changes in England and Northern Ireland.
There had been criticism of the Scottish government’s slowness in reacting to the SDLT reduction outlined in the summer economic update, with suggestions that by not increasing the threshold immediately, buyers could decide to delay their purchase and so cause transactions to stall.
Kate Forbes, finance secretary said: ‘I am delighted that we are able to implement this measure quickly and remove uncertainty from the market.
‘The UK government had weeks to prepare for its decision this week to raise the threshold at which SDLT is paid on house purchases in England and Northern Ireland, yet we were given no advance notice.
‘We responded yesterday to clarify our policy intentions and by introducing the change so rapidly, we are providing certainty to people in the process of purchasing a home. Overall, increasing the LBTT threshold will help increase housing market activity, boost the construction sector and stimulate our economy.
‘To mitigate the immediate adverse impact on the housing market in Scotland as a result of the Chancellor’s announcement, we are now working at pace on the necessary legislation and to ensure Revenue Scotland is ready to collect and manage the tax.’
The Scottish government said the change will be made with effect from Wednesday but will require approval by the Scottish Parliament within 28 days to remain in force.
Joanne Walker, CIOT Scottish technical officer, said: ‘Once implemented, the changes will mean that an additional 34% of transactions will be taken out of LBTT, taking the total to 79%. This will generate a maximum saving to taxpayers of £2,100.
‘That said, it remains the case that across the UK, there is still some uncertainty over who gains from a change of this kind. A 2011 UK government study found that previous cuts to help first-time buyers were mostly absorbed in a higher house price, benefiting sellers rather than purchasers.’
LBTT replaced SDLT in Scotland on 1 April 2015. The tax is payable at different rates on each portion of the purchase price within specified tax bands.
As well as raising the starting threshold for LBTT, the Scottish government is injecting £50m into the First Home Fund, which provides first time buyers with up to £25,000 to buy a property. Forbes said this will help an estimated 2,000 first time purchases.