“In less than six months, property buyers in Scotland will pay a new tax. Unlike stamp duty land tax (SDLT), which will continue to apply to the rest of the UK, LBTT will be a ‘slice system’ rather than a ‘slab system’. This means that tax will be payable at the relevant rates only on the amount over each threshold, not on the whole price.
“Publication of the draft rates gives some certainty to Scottish property buyers of what tax costs will apply next year. It enables investors, developers and occupiers to start planning their affairs. The announcement of the rates is likely to stimulate significant sales of higher-value properties in the run-up to April next year.”
The rates and bands that will apply, subject to approval by the Scottish Government, are as follows:
Type of property
Under £135,000
Over £135,000 but not over £250,000
Over £250,000 but not over £1,000,000
Over £1,000,000
Residential
0%
2%
10%
12%
Under £150,000
Over £150,000 but not over £350,000
Over £350,000
Commercial
0%
3%
4.5%
The tax rates have been designed to be revenue neutral so tax savings for some will be funded by a higher tax contribution by others.
Under the proposed charging structure
• the effect of bunching of sales at the tax bands that exists for SDLT should reduce,
• a house purchased, eg, for £260,000 would give rise to an SDLT charge of £7,800, the comparable charge under LBTT would be £3,300 (a 42% saving)
• a house purchased, eg, for £510,000 would give rise to an SDLT charge of £20,400, but LBTT of £28,300 (a 39% increase),
• a house purchased, eg, for £1.5 million would give rise to an SDLT charge of £75,000, the comparable charge under LBTT would be £137,300 (an 83% increase),
• the rates for commercial properties are broadly similar
• an office purchased, eg, for £2m would give rise to an SDLT charge of £80,000, the comparable charge under LBTT would be £80,250 (a 0.3% increase)
• there have been no changes to bands or rates for new commercial leases, and
• new residential leases are exempt from LBTT but not SDLT.