The Scottish Government’s decision to revise its rates and bands for the new property tax is welcome news for many first time buyers and home-movers alike.
The Land and Buildings Transaction Tax (LBTT) comes into effect from today (1 April 2015) and will result in more than 50% of all household transactions paying no tax and over 40,000 buyers paying less when purchasing a new property*.
Approximately 10,000 house purchases which would currently be required to pay UK Stamp Duty will be no longer be liable to pay tax as a result of the new legislation. With the key target market being first time buyers, it is certainly positive news for those looking to climb onto the property ladder, as those looking to buy for anything less than £145,000 will not pay any LBTT.
This is undoubtedly a much needed boost to the lower end of the market in Scotland, where the average price of a house is £170,000. It is widely believed that around 90% of buyers should benefit from the new tax, paying much less than the UK Stamp Duty Land Tax.
The revised rates will also help many people as they move through the property market and have been generally welcomed with the view they will lessen the “tax burden” of those looking to purchase fairly moderate properties in central locations in Scotland.
Under the original LBTT rates, areas where buying a large family home is generally considered more costly such as Edinburgh, Aberdeen and parts of Glasgow, would have witnessed a notable increase in the up-front cost of moving. The adjusted rates now mean the threshold at which buyers will pay more tax compared to UK Stamp Duty has increased from £254,000 to £330,000.
Those who stand to benefit the most will be middle income families as they endeavour to climb up the property ladder, especially in Edinburgh, where house prices are generally higher in relation to the rest of the country.
For example, the average of price for a detached home in Edinburgh is approximately £390,000 and generally much higher in areas such as Morningside and Murrayfield. Under the initial proposals, a property of this value would have been liable to pay a £16,300 tax bill. However, the new LBTT rates would now mean a bill of £12,350, a reduction of 24%.
It is important that the new bands keep the market moving in the right direction and that the revival in prices and transactions continues to gather pace. With this being said, the new LBTT rates are indeed positive news for the majority of first time buyers and homemovers alike.
For more information on the rates and thresholds announced on 21 January 2015 click here.
*Source: The Scottish Government