Paul Alcorn: Land and Buildings Transaction Tax rate change
Paul Alcorn, legal executive at law firm Jones Whyte, discusses the changes to Land & Buildings Transaction Tax and how it impacts buyers.
From 15 July 2020 until 31 March 2021 the threshold that the Land and Buildings Transaction Tax (LBTT) begins to be paid for residential property purchases will increase from £145,000 to £250,000.
Kate Forbes MSP as the Finance Secretary has announced that the change to the LBTT threshold means that 80% of home buyers will have no LBTT to pay at all and that those purchasing properties over £250,000 will save up to £2,100 on the LBTT due.
The changes to the LBTT threshold come after the property market was effectively frozen since mid-March’s lockdown meaning that in-person property viewings weren’t possible and market certainty waivered. However, with the reduction in LBTT and the re-opening of the economy we are now seeing indications of the property market reopening as buyers and sellers can progress transactions with greater certainty.
With the threshold increasing to £250,000, first-time buyers may be curious to know whether they will benefit from both the increased threshold as well as the First-time Buyer Relief that saw them save up to £600 on the LBTT bill.
The answer is sadly not. What the First-time Buyer Relief did was to increase the prior threshold from £145,000 to £175,000 which gave them the £600 discount. Now, however, there is no way for first-time buyers to benefit from this relief as there is no LBTT due at all on properties up to £250,000.
The silver lining here is that the loss of the First-time Buyer Relief is because first-time buyers (and all buyers in Scotland, for that matter) can benefit from the increased threshold which will save them up to £2,100.
Timing of Completion
As with everything there is a ‘but’.
If your property transaction completed (typically coinciding with the day you receive the keys) prior to 15 July 2020 then I am afraid you won’t benefit from the increase in threshold.
The issue was first realised by most Scottish law firms and estate agencies when the news came that the English and Northern Irish Stamp Duty Land Tax threshold was to be immediately increased to £500,000. This led to some uncertainty if or when similar steps would be taken in Scotland.
This may have led to your solicitor advising you to push your completion date back until the Scottish Government made their announcement and it has been our advice to clients here at Jones Whyte. Since the Scottish Government announcement we have been delighted to update our clients with the news of the savings to their LBTT bill.