How will the Scotland LBTT holiday affect buyers?

When the country was placed into lockdown due to the spread of the coronavirus, it left the property market in a state of limbo, with many people unsure of what affect it would have and whether to stick or twist with their planned property purchases.  

However, in order to give a boost to the property market, the Scottish Government announced in July that a 'LBTT holiday' was to be introduced, giving buyers some welcome help as we ease out of lockdown restrictions. In this post we look at what this change means for buyers.

LBTT explained

LBTT stands for Land and Buildings Transaction Tax and it is a tax that is applied to residential and commercial land and building transactions.

LBTT replaced Stamp Duty in Scotland, which is the system used in England and Northern Ireland, on 1st April 2015. There are 4 tax bands for residential properties and 3 for  commercial properties.

The amount of LBTT you need to pay on your purchase will depend on the price of the property and is calculated by taking into account the bands the purchase price falls into. The percentage rate for each band in LBTT is applied only to the part of the price over the relevant threshold and up to the next threshold.

What do these changes mean for buyers?

On the 9th July, the Cabinet Secretary for Finance, Kate Forbes MSP, announced that the starting threshold for LBTT for residential property transactions would be raised from £145,000 to £250,000. This was done on the back of the announcement made by UK Chancellor Rishi Sunak's declaring a stamp duty holiday on house sale transactions in England and Northern Ireland.

The changes began on Wednesday 15th July and remain in place until 31st March 2021. This means that for any residential property purchased during this time under the £250,000 value, you will pay any LBTT.

This change applies to both first time buyers as well as those moving from their existing home.

How much can I save?

Now this is the question that buyers are most interested in! It is estimated that with these changes, 80% of house buyers in Scotland will be exempt from LBTT, with a total saving of up to £2,100 available if they move home by the 31st March next year. The table below shows you what LBTT is applied in each price bracket.

Francesca Hill, DM Property's Assistant Property Manager, was glad to see the Scottish Government introduce this scheme.

"The LBTT holiday is a much needed measure of support to both stimulate the Scottish property market and give a helping hand to purchasers during these difficult and uncertain times. We at Drummond Miller Property have already seen an increase in listings since the announcement and a positive reaction to the news from our clients."

What about buying a second property?

If you already own a home and are interested in purchasing an additional property (e.g. a buy-to-let property or a second home), you will still need to pay the Additional Dwelling Supplement (ADS) that is currently in place. In Scotland this is 4% of the purchase price. However, you will still have the benefit from the raised threshold for the standard land and buildings transaction tax. 

If you would like more advice on the LBTT holiday scheme or have any other queries regarding buying a property, contact us for a chat.