Scottish government to reduce LBTT rate
The Scottish government will reduce the rate of Land and Buildings Transaction Tax (LBTT) following a similar reduction to the rate of residential Stamp Duty Land Tax (SDLT) announced by Chancellor Rishi Sunak in the recent Summer Economic Update.
LBTT is payable by the purchaser in a land transaction occurring in Scotland. SDLT applies to land transactions in England and Northern Ireland, and Land Transaction Tax (LTT) applies in Wales.
The threshold at which residential LBTT is paid will be raised from £145,000 to £250,000 in order to help homebuyers following the coronavirus (COVID-19) lockdown. Announcing the change, Finance Secretary Kate Forbes said that 80% of homebuyers will be exempt from paying LBTT.
Commenting on the issue, Joanne Walker, Scottish Technical Officer at the Chartered Institute of Taxation (CIOT), said: 'Once implemented, the changes will mean that an additional 34% of transactions will be taken out of LBTT, taking the total to 79%. This will generate a maximum saving to taxpayers of £2,100.
'That said, it remains the case that across the UK there is still some uncertainty over who gains from a change of this kind. A 2011 study found that previous cuts to help first-time buyers were mostly absorbed in a higher house price, benefitting sellers rather than purchasers.'
Legislation is to be introduced to the Scottish Parliament to provide the revised residential LBTT rates and bands. These will apply to all relevant transactions where the effective date is between 15 July 2020 and 31 March 2021.