The LBTT will replace the SDLT in Scotland from April this year, as part of the devolution of limited tax powers to the Scottish Parliament. The initial rates announced during the consultation stage were higher than the new rates announced today, as shown in the table below. John Swinney, Scottish financial minister said that the rates had changed because of the new stamp duty rates announced in December, and as a result of feedback to his consultation on the LBTT.

A new 5% rate has been introduced as shown in the charts below, which means that LBTT payable on homes worth up to £333,000 will be less than stamp duty in England and Wales from April. It also means that purchase taxes will be lower for all purchases on properties up to £947,500 compared to the initially suggested LBTT rates.

From April, purchasing a home worth £400,000 will result in LBTT of £13,350, rather than £17,300 which would have been payable under the rates initially suggested by the Scottish Government.

House price

Revised LBTT rate

£0-145,000

0%

£145,001-£250,000

2%

£250,001-£325,000

5%

£325,000-£750,000

10%

£750,000+

12%


"The new LBTT rates mean that the threshold at which buyers will pay more tax compared to the current UK stamp duty system has risen from £254,000 to £330,000."

_Oliver Knight

“Compared to the original proposals, the new bands are less punitive on middle income families and those buying property for sub-£1m. However, when the rates come into force in April, property buyers looking to purchase family homes in core locations of Scotland such as in Edinburgh, Aberdeen and parts of Glasgow will face a significantly higher tax bill compared to what is payable under the current stamp duty system.

“As a result, between now and April, we expect to see an increase in the number of prime sales and homes coming to the market as both buyers and vendors look to move before costs rise.”

Edward Douglas-Home, Head of Edinburgh City Sales at Knight Frank, comments: “The average cost of a detached family home in Edinburgh is around £390,000, but considerably more in areas such as Morningside, The Grange and Murrayfield, New Town and the West End. Currently homebuyers pay £9,500 in stamp duty for such a property. Based on the new LBTT rates, a property valued at £390,000 will be liable for a £12,350 tax bill, 30% more.

“For properties valued over £947,500 purchasers will face a higher tax bill than under the original LBTT levy and a significantly higher bill when compared to current UK stamp duty rates, which may impact on transaction levels at the top end of the market

“What effect this will have on transaction rates only time will tell. A transitional housing market is vital to the economy and particularly now to the Treasury’s revenue stream. These new taxes will be judged a success or failure based on the revenue collected by the time of the Scottish elections in 2016.”

Non-residential transactions

But what do the revised Land and Building Transaction Tax (LBTT) rates for residential properties this mean for farmers and landowners?

Essentially for non-residential transactions, for example those involving agricultural land or forestry, the rates have remained the same as those announced by the Scottish Government last year and the below rates of LBTT will apply..

Based on average farm prices most buyers of agricultural property in Scotland will be better off with LBTT.

While there will be a slight rise, high end estate and farm sales will escape the substantial tax increase that LBTT means for middle market and premium residential properties.

As a result, the new levy is likely to have a far less dramatic impact on sales in the farm sector and, in actual fact, will benefit buyers of non-residential properties up to £2m.

The tax increase for a farm worth £2 million is a relatively minimal £250. For a higher value farm, worth £5 million for example, the tax increase will be £15,250.