The new rules for property transactional taxes in Scotland will come into effect in April 2015 and see the UK Stamp Duty Land Tax (SDLT) replaced by the Land and Buildings and Transactions Tax (LBTT) rates.
The new rates, which are detailed in the draft Scottish budget for 2015/2016, will see no transactional tax on properties costing less than £135,000. Further, at the opposite end of the property ladder, a new 12% tax on homes worth more than £1million will be generated.
A positive of the implementation of the new tax regime is that there has been an influx of middle to top end of the market property purchases in the period since the Referendum on Independence seeking to secure property before the new rates implementation.
However, homes over the approximate value of £325,000 will be subject to more (in some instances considerably) transactional tax under the LBTT format than SDLT. Thus, in residential purchases, particularly in metropolitan hubs like Glasgow, Edinburgh or Aberdeen, are likely to see a considerable rise in the transactional costs.
The proposed increases in tax rates, especially in prime commuter locations where average property prices are higher, may discourage many first time buyers. The continued resurgence of the Scottish housing market relies on movement at both ends of the market; therefore, it can be argued that the new tax will have a negative impact at the higher end. A longer-term analysis of the system is likely to see short-term inactivity while the market readjusts to the new regulatory measures.
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