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Proposed property transaction tax rates show steep payment curve

10 October 2014

Buyers of lower priced houses will gain, but purchasers of more expensive houses will pay much more under the tax rates for the new land and buildings transaction tax planned by the Scottish Government.

Under the proposals announced by Finance Secretary John Swinney yesterday, as he unveiled his budget for the 2015-16 financial year, the cut-off point for a domestic property, above which a purchaser will pay more than at present, will be £324,300.

Land and buildings transaction tax (LBTT) replaces the current stamp duty land tax (SDLT) in Scotland from next April. Mr Swinney proposes that no tax would be payable where the purchase price is no more than £135,000, a 2% charge would be levied on that part of a price falling between £135,000 and £250,000, but 10% would be payable on any part of the price over £250,000, and 12% on the excess if a property sells for over £1m.

As SDLT rates apply to the whole price once a property crosses a relevant threshold, a purchaser between the current £125,000 threshold and £135,000 would save £1,250-£1,300. At £250,000 a property attracts £2,500 in SDLT but would require £2,300 in LBTT; at £400,000 the figures are £12,000 SDLT but £17,300 LBTT; and at £1m the SDLT charge is £40,000 but LBTT of £77,300 would be payable.

Mnisters say that no tax would be paid on 45% of transactions, and 90% of purchasers would either pay less tax or no more than at present.

Mr Swinney said: “The old stamp duty was outdated – causing unfair tax hikes at set property prices.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."

Gavin Brown for the Conservatives asked: "How can the Cabinet Secretary justify an eye-watering 10% tax on houses over the value of £250,000?

"There are pockets of this country, such as Edinburgh, where family homes for hardworking families are considerably in excess of that."

Non-residential

For non-residential properties, the proposed rates at 0% at up to £150,000; 3% on the band above £150,000 up to £350,000; and 4.5% on any part of a price above £350,000. Non-residential leases will be charged at 1% of the net present value of the rent payable under the lease, so far as exceeding £150,000, with any premium attracting the same tax rates as a non-residential purchase.

SDLT on non-residential properties is charged at 1% when the price exceeds £150,000, 3% when it exceeds £250,000 and 4% when it exceeds £500,000.

Have your say


Your comment

David Barrie Grieve

Friday October 10, 2014, 11:54

A graded tax dependent on property value reflects a more equitable system not dissimilar to income tax.

Areas where house prices are already higher by tradition, might experience a welcomed tendency to overall reduction in house prices, thereby reducing snob ghettos.


maureen rowatt

Wednesday November 26, 2014, 18:02

Can you please explain the £324,300 threshold. Your article doesn't mention it again after the 1st paragraph.

[Editor's note: This is the point above which the amount of LBTT paid under the proposed rates will begin to exceed the amount of SDLT paid under the present system. Once a property is into the 10% band, the amount of tax due will climb more steeply with the price than under SDLT.]