It is safe to say that the property ladder in Scotland is becoming ever more difficult to join for first-time buyers. The marketplace is increasingly competitive as property prices continue to rise, whilst residential stock remains low.
Acknowledging the difficulties presented by present market conditions, and with a view to helping first-time buyers make the leap, the Scottish Government outlined in their draft 2018-19 Budget a plan to raise the Land and Buildings Transaction Tax Threshold for first time buyers from its current level of £145,000 to £175,000.
Cue a consultation period, and fast forward to 30 June 2018, and the proposed tax relief is now a reality by virtue of The Land and Buildings Transaction Tax (First-Time Buyer Relief) (Scotland) Order 2018.
Land and Buildings Transaction Tax is a tax on residential and commercial land and buildings transactions in Scotland in which a chargeable interest is acquired. Currently, the tax is payable on the portion of the price over and above the £145,000 threshold, and is percentage based, as outlined in the below table.
|
Purchase price |
LBTT rate |
|
Up to £145,000 |
0% |
|
Above £145,000 to £250,000 |
2% |
|
Above £250,000 to £325,000 |
5% |
|
Above £325,000 to £750,000 |
10% |
|
Over £750,000 |
12% |
The First-Time Buyer Relief increases the nil rate band to £175,000 for first-time buyers, and will be effective for those transactions where:-
- The purchaser intends to occupy the property as their main or only residence,
- The purchaser does not own nor has previously owned a dwelling in Scotland, the rest of the UK or the rest of the world,
- The purchase contract is entered into (i.e. missive are concluded) on or after 9 February 2018, and
- The effective date of the transaction, otherwise the date of entry, is on or after 30 June 2018.
It is worth noting that companies do not qualify as first time buyers, even if they are acquiring property for the first time.
It is predicted that 80% of first-time buyers will no longer pay Land and Buildings Transaction Tax as a result of this change and, each year, around 12,000 first time buyers will benefit. Those first-time buyers who meet the criteria will benefit from the relief, in some cases by up to £600, a significant saving. Those first-time buyers buying a property above £175,000 will also benefit from the relief on the portion of the price below the £175,000 threshold.
The relief joins the list of government initiatives, including, Help to Buy ISAs, Help to Buy Scotland and the LIFT scheme, in assisting first time buyers.
Lisa Mannion is a Associate in the Residential Property team. Please contact Lisa on 01382 229111 or lmannion@thorntons-law.co.uk or any other member of the Residential Property team if you would like to discuss purchasing property further.
