Land and buildings transaction tax changes
27 January 2016
The Scottish government issued draft legislation on 27 January 2016 revising the Land and Buildings Transaction Tax (LBTT) provisions.
For those acquiring an additional property in Scotland, from 1 April 2016 an additional LBTT rate of 3% is to be payable on the purchase of additional residential properties in Scotland over £40,000. This mirrors the changes announced by the Chancellor George Osborne in respect of Stamp Duty Land Tax.
The scope is wider than just targeting second homes and will apply for example to additional residences being acquired for letting or as furnished holiday lets. The 3% supplement would be applied to the whole purchase price and not just the proportion of the purchase price above £40,000.
The table below illustrates how the proposed rates would apply to a property of over £40,000.
| Band | Current Tax Rates for 2nd Homes | Proposed Tax Rates for 2nd Homes |
|---|---|---|
| £0- £40,000 | 0% | 3% |
| £40,000- £145,000 | 0% | 3% |
| £145,000 - £250,000 | 2% | 5% |
| £250,000 - £325,000 | 5% | 8% |
| £325,000 - £750,000 | 10% | 13% |
| £750,000 | 12% | 15% |
The LBTT supplement will be chargeable when the buyer owns more than one dwelling (whether in Scotland or another country). The LBTT supplement will not apply if the purchaser is replacing their existing main residence.
If you buy a new main residence and haven’t at that time disposed of the old one, then you have 18 months from the purchase of the new main residence to do so, although you will have to pay upfront the higher rates of LBTT and then obtain a refund.
The LBTT supplement will apply to all purchases of residential properties by companies and other such non-natural persons, irrespective of whether or not they already own a residential property.
Married couples, those in civil partnerships and cohabitants (those living as if a married couple) along with their dependent children will be treated for the purposes of the LBTT supplement as one economic unit. The supplement will apply where one spouse owns the existing family home and the other spouse acquires an additional residential property.
Indirect interests in properties, i.e. via Trusts (if a liferent beneficiary) will also count as a residence.
Got a question? For more information on LBTT changes get in touch with your usual Johnston Carmichael contact or a member of the Private Client Tax team.
