The Scottish Government recently published its draft budget for 2016-17, which includes details on its tax proposals for the next financial year.
In its proposals, the Scottish Government has confirmed that it intends to maintain Land and Buildings Transaction Tax (LBTT) at its current levels. LBTT replaced UK Stamp Duty Land Tax (SDLT) in Scotland from April 2015.
According to Deputy First Minister John Swinney, making no changes to the rate of LBTT will ensure that those purchasing properties worth £330,000 or less will pay less tax than under UK stamp duty, or no tax at all – representing over 93% of home buyers in 2016-17.
However, the Government has also announced its intention to introduce a LBTT ‘second-homes’ supplement of 3% on purchases of additional residential properties, including buy-to-let properties.
“The proposed LBTT supplement on purchases of additional residential properties, such as buy-to-let or second homes follows the new surcharge proposed by the UK Government in last month’s Spending Review,” explained Mr Swinney. “The proposed supplement is three percentage points of the total price of the property for all relevant transactions above £40,000 and will be levied in addition to the current LBTT rates.”
“Our objective is to make sure that first time buyers have the greatest possible chance to enter the housing market,” he said. “We are therefore taking action to avoid the likely distortions which will arise in Scotland from the new UK SDLT surcharge on the purchase of additional properties – including buy-to-let and second homes – which could make it more attractive to invest in such properties in Scotland compared to other parts of the UK.”
“Our LBTT additional homes supplement therefore seeks to ensure that the opportunities for first time buyers to enter the housing market in Scotland remain as strong as they possibly can,” he added. “The proposed additional levy of three percentage points on transactions over £40,000 is proportionate and fair.”
The LBTT supplement, together with other budget proposals, are subject to the approval of Parliament and will become payable from April 2016.
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