50 per cent of homeowners to pay no tax under new rates

The new rates will see 50 per cent of all household transactions paying no tax and over 40,000 buyers paying less on the purchase of a new home.

The land and buildings transaction tax (LBTT) will replace UK stamp duty land tax from April 2015.

The new rates and bands were announced to parliament as part of the stage one debate on the Scottish budget 2015/16.

Around 10,000 house purchases which would currently be liable for UK stamp duty will be removed from tax by the new proposals.

The marginal rates, for the first taxes to be set in Scotland for 300 years, will provide additional benefit to first-time buyers and those at the lower end of the housing market.

With effect from the 1st April 2015:

• To provide further support for First Time buyers the threshold for beginning to pay LBTT will be increased to £145,000 – taking 50 per cent of transactions, or another 10,000 homes out of tax altogether compared to current system of Stamp Duty.

• A marginal rate of 2 per cent will apply to transactions between £145,000 and £250,000;

• A new marginal rate of 5 per cent will be introduced between £250,000 and £325,000 restoring the benefit for those buying properties up to the value of £330,000;

• Between £325,000 and £750,000 the marginal rate will be 10 per cent

• In order to ensure that we are able to provide benefits for those at the bottom of the market, whilst retaining the principle of proportionality, the top rate of 12 per cent will now affect all transactions above £750,000.

As a result of the rates set out today

• 90 per cent of tax payers better or no worse off than under UK Stamp Duty Land Tax

• more than 90,000 taxpayers will be better or no worse off under the Scottish system than under UK Stamp Duty Land Tax,

• all those buying a residential property in Scotland for £330,000 or less will pay up to £400 less tax under LBTT, or will pay no tax at all.

• 99.9 per cent of residential transactions will pay less LBTT or no LBTT at all, compared to the proposed rates and bands in October. Only those buying a home for more than £945,000 will pay more in tax under our new plans, compared to our Draft Budget proposals.

Mr Swinney said: “In order to remain true to my principle that the first rates and bands of the devolved taxes should be revenue neutral, it is only right that I review the proposed tax rates which I set out last October.

“In doing so I will remain true to all of the principles that I established in October.

“My priority was then, and remains now, to help first-time buyers to enter the housing market and to assist people as they progress through the property market. Consistent with the principle that tax should be proportionate to the ability to pay, the burden of taxation should fall on each according to their ability.

“Tax rates should also be designed to support the Scottish market. The average house price in Scotland is £170,000. The average detached house is around £244,000. In contrast the average house price in London is £510,000.

“With 50 per cent of transactions lifted out of tax altogether, the measures I am proposing today send a very clear message.

Karen Turner, property sales director at Pagan Osborne, said: “The announcement by the Scottish government to review the land and buildings transaction tax percentage is to be welcomed but it is disappointing to note the higher levels of taxes many Scottish buyers will be subject to come April.

“With the 10 per cent rate of tax to kick in at £325,000 as opposed to £925,000 in the UK system and the 12 per cent rate at £750,000 instead of £1.5m there will certainly be a high number of people at the higher end of the market looking to take advantage of the current system in the coming months.”

Isobel d’Inverno, convener of the Law Society of Scotland’s tax law committee, said: “The revised levels proposed in today’s budget announcement mean that first-time homebuyers in Scotland will not be put at a disadvantage compared to those elsewhere in the UK when the new tax comes into effect in April this year.

“The legislation introducing the land and buildings transaction tax, passed in June last year, was the first tax bill passed by a Scottish parliament in over 300 years and it’s important that the government gets it right for Scottish taxpayers.”