First Time Buyers – Land and Building Transaction Tax Explained
What is LBTT?
When buying a property in Scotland, you will usually have to pay Land and Building Transaction Tax (LBTT) – which replaced Stamp Duty in Scotland in 2015. Though the price bands differ slightly, the system works in much the same way as Stamp Duty used to.
What are the changes being proposed?
Important to know for first time buyers, it was recently announced in the new budget that the Scottish Government is proposing to raise the tax-free limit to £175,000, for properties bought by first-time buyers. As a result, up to 80% of first-time buyers will pay no stamp duty at all and even if your first home is more expensive than £175,000, you’ll still benefit from the relief – saving you up to £600.
How do changes affect first time buyers?
The new tax relief is due to come into effect from June 2018 and will see the zero tax threshold increase from the current £145,000 mark to £175,000. The Scottish Government explained that alongside measures to create new housing stock, this change to LBTT is an effort to help first-time buyers onto the property ladder and make home ownership a reality for more people.
The new incoming LBTT tax rates will go as follows, with zero tax on properties up to £175,000, 2% on properties between £175,000 -£250,000, 5% between £250,001 – £325,000, 10 % between £325,001 – £750,000 and 12% on any properties bought for £750,000 plus.
What do I need to do as a first time buyer?
It may be worth your while financially to keep this £175,000 limit in mind. At Caledonia Property we have some great starter home at this price and under from this modern, mid-terrace villa in Paisley at offers over £145,000 to various fixed priced new development properties in Alexandria, on the market from £172,500 and this well-presented two bed well below the threshold at offers over £122,995.
If the price of your new home is under £175,000, you must still submit a return (unless exempt, ie if transferring property in a divorce) even though you won’t need to pay any LBTT. Usually your solicitor will handle these details for you however, though there is always the option to do so yourself.