The Scottish government has announced changes to the rates and bands of its land and buildings transaction tax (LBTT), which will replace the UK’s SDLT in the jurisdiction from 1 April 2015. The nil rate will now apply up to £145,000, with a new marginal rate before the top 12% rate applies to transactions over £750,000.
The changes will mean that, with effect from the 1 April 2015:
the threshold for beginning to pay LBTT will be increased to £145,000;
a marginal rate of 2% will apply to transactions between £145,000 and £250,000;
a new marginal rate of 5% will be introduced between £250,000 and £325,000;
between £325,000 and £750,000, the marginal rate will be 10%; and
the top rate of 12% will now affect all transactions above £750,000.
The changes, announced by John Swinney, finance secretary in the Scottish Parliament, mean that the tax will be lower for those buying properties at average Scottish prices than initially proposed in the draft Budget 2015/16 and also lower than in the rest of the UK – a move which the CIOT said showed ‘how the UK tax environment is becoming increasingly dynamic and competitive, with changes in Westminster and Holyrood feeding off one another’, adding that ‘political and economic competition across the border is now an increasingly visible fact of life’.
Moira Kelly, chair of the CIOT’s Scottish technical sub-committee, explained: ‘The Scottish government got much praise when they announced the end of the “slab system”, which distorted property sales by creating cliff edges at particular property values, and did so in a way that cut tax bills for buyers of low and averagely priced homes. Westminster followed suit in December, sweetening the move with extra money to make 98% of home buyers winners. But that changed the dynamics in Scotland, creating many more potential losers under the changes compared to the rest of the UK, so Holyrood is responding with further changes of its own. As further tax devolution takes effect we are likely to see more of this. Westminster will no doubt want to watch carefully to see what reaction changes made by the Scottish government get, and what effect they have, while Holyrood will inevitably have to take account of any significant changes south of the border which change the relative competitiveness of the two tax systems.
‘The changes announced by John Swinney bring the new system more closely into line with the Scottish government’s principle of a progressive tax system, with taxes being proportionate to a taxpayer’s ability to pay. The CIOT has previously said to the Finance Committee of the Scottish Parliament that ideally there should not be a significant leap in the rate of tax from band to band. The original proposal included a huge leap from 2% to 10%, and had only three rates. The introduction of an additional band with a 5% rate provides for more progression and differentiation, which is something we suggested to the Finance Committee in October.’
As a result of the new rates set out, the Scottish government said that: 90% of taxpayers would be better or no worse off than under UK SDLT; more than 90,000 taxpayers will be better or no worse off under the Scottish system than under SDLT; all those buying a residential property in Scotland for £330,000 or less will pay up to £400 less tax under LBTT, or will pay no tax at all; and that 99.9% of residential transactions will pay less LBTT or no LBTT at all, compared to the proposed rates and bands in October. Only those buying a home for more than £945,000 will pay more in tax under the new plans, compared to the draft Budget proposals.
Scottish finance secretary John Swinney commented: ‘One consequence of the chancellor’s announcement in December is that the amount of revenue I am required to raise to meet the principle of revenue neutrality is lower than anticipated at the time of the draft Budget.’
He added: ‘Tax rates should also be designed to support the Scottish market. The average house price in Scotland is £170,000. The average detached house is around £244,000. In contrast the average house price in London is £510,000. With 50% of transactions lifted out of tax altogether, the measures I am proposing send a very clear message.
‘In exercising its first judgments on national taxes, this government has put fairness, equity and the ability to pay at the heart of what it has done. Where we have power to do so, this government will do all it can to help people in Scotland enter the housing market, because it is the right thing to do for our economy and our communities.’
The Scottish government has announced changes to the rates and bands of its land and buildings transaction tax (LBTT), which will replace the UK’s SDLT in the jurisdiction from 1 April 2015. The nil rate will now apply up to £145,000, with a new marginal rate before the top 12% rate applies to transactions over £750,000.
The changes will mean that, with effect from the 1 April 2015:
the threshold for beginning to pay LBTT will be increased to £145,000;
a marginal rate of 2% will apply to transactions between £145,000 and £250,000;
a new marginal rate of 5% will be introduced between £250,000 and £325,000;
between £325,000 and £750,000, the marginal rate will be 10%; and
the top rate of 12% will now affect all transactions above £750,000.
The changes, announced by John Swinney, finance secretary in the Scottish Parliament, mean that the tax will be lower for those buying properties at average Scottish prices than initially proposed in the draft Budget 2015/16 and also lower than in the rest of the UK – a move which the CIOT said showed ‘how the UK tax environment is becoming increasingly dynamic and competitive, with changes in Westminster and Holyrood feeding off one another’, adding that ‘political and economic competition across the border is now an increasingly visible fact of life’.
Moira Kelly, chair of the CIOT’s Scottish technical sub-committee, explained: ‘The Scottish government got much praise when they announced the end of the “slab system”, which distorted property sales by creating cliff edges at particular property values, and did so in a way that cut tax bills for buyers of low and averagely priced homes. Westminster followed suit in December, sweetening the move with extra money to make 98% of home buyers winners. But that changed the dynamics in Scotland, creating many more potential losers under the changes compared to the rest of the UK, so Holyrood is responding with further changes of its own. As further tax devolution takes effect we are likely to see more of this. Westminster will no doubt want to watch carefully to see what reaction changes made by the Scottish government get, and what effect they have, while Holyrood will inevitably have to take account of any significant changes south of the border which change the relative competitiveness of the two tax systems.
‘The changes announced by John Swinney bring the new system more closely into line with the Scottish government’s principle of a progressive tax system, with taxes being proportionate to a taxpayer’s ability to pay. The CIOT has previously said to the Finance Committee of the Scottish Parliament that ideally there should not be a significant leap in the rate of tax from band to band. The original proposal included a huge leap from 2% to 10%, and had only three rates. The introduction of an additional band with a 5% rate provides for more progression and differentiation, which is something we suggested to the Finance Committee in October.’
As a result of the new rates set out, the Scottish government said that: 90% of taxpayers would be better or no worse off than under UK SDLT; more than 90,000 taxpayers will be better or no worse off under the Scottish system than under SDLT; all those buying a residential property in Scotland for £330,000 or less will pay up to £400 less tax under LBTT, or will pay no tax at all; and that 99.9% of residential transactions will pay less LBTT or no LBTT at all, compared to the proposed rates and bands in October. Only those buying a home for more than £945,000 will pay more in tax under the new plans, compared to the draft Budget proposals.
Scottish finance secretary John Swinney commented: ‘One consequence of the chancellor’s announcement in December is that the amount of revenue I am required to raise to meet the principle of revenue neutrality is lower than anticipated at the time of the draft Budget.’
He added: ‘Tax rates should also be designed to support the Scottish market. The average house price in Scotland is £170,000. The average detached house is around £244,000. In contrast the average house price in London is £510,000. With 50% of transactions lifted out of tax altogether, the measures I am proposing send a very clear message.
‘In exercising its first judgments on national taxes, this government has put fairness, equity and the ability to pay at the heart of what it has done. Where we have power to do so, this government will do all it can to help people in Scotland enter the housing market, because it is the right thing to do for our economy and our communities.’
