Land and Building Transaction Tax

Following on from previous blogs regarding the LBTT, which comes into force on 1 April 2015, I would advise that the Scottish Government has now released the rates and bands.  As readers of previous blogs will know, the LBTT replaces Stamp Duty Land Tax in relation to transactions involving land in Scotland.  The LBTT is a progressive tax which means that slices will be taxed at different rates depending on the bracket they fall into, very much like Income Tax, rather than SDLT which was a slab tax. 

I would advise that the residential and non-residential rates are as follows:-

Residential Rates

Purchase Price up to £135,000 – LBTT Rate – 0%

Above £135,000 to £250,000 – LBTT Rate – 2%

Above £250,000 to £1m – LBTT Rate – 10%

Above £1m – LBTT Rate – 12%

Non-Residential Rates

Purchase Price up to £150,000 – LBTT Rate – 0%

Above £150,000 to £350,000 – LBTT Rate – 3%

Above £350,000 – LBTT Rate – 4.5%

I have been advised that the price at which SDLT and LBTT produce the same liability on a residential purchase is £324,285, with prices below that amount seeing a saving under the new rates, whereas prices above that level will be taxed more.  For interest, a purchase at £200,000 would currently generate a SDLT charge of £2,000.   Under the new regime, this will incur a charge of £1,300.  On the other hand, a purchase of £500,000 currently attracts an SDLT charge of £15,000 but under the new rate this will be £27,300.  In relation to commercial transactions, the point at which LBTT exceeds SDLT is a purchase price of £1.95m.

Whilst I welcome the introduction of a progressive rather than slab tax, I am concerned that the rates are onerous and will have a more extreme negative impact than the positive impact that will apply mainly for purchases between £130,000 and £250,000.   I would have preferred to see more bandings with a more gradual rate of increase.  I suspect that the new LBTT will have a significant impact in slowing down the mid-market purchases and I hope that the Scottish Government review these rates and banding levels sooner rather than later.

Lindsay Darroch
Partner & Head of Property

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