Land & Buildings Transaction Tax Holiday 2020

Land & Buildings Transaction Tax Holiday

From 15 July 2020, house buyers in Scotland will pay no Land & Buildings Transaction Tax (LBTT) on any property up to £250,000.

What’s more, those who buy for more than £250,000 will save £2,100!

In March, when the lockdown was ordered by The Government, the housing market came to an almost complete stop. Recognising the fact that the property market needs support to bounce back, governments in Westminster and Edinburgh decided to roll out appropriate support. One measure introduced has been a Stamp Duty holiday in England and a Land & Buildings Transaction Tax holiday in Scotland.

According to Kate Forbes, MSP, the Cabinet Secretary for Finance, the measures taken to increase the LBTT threshold will mean 80% of all purchasers in Scotland won’t pay any LBTT at all.

The LBTT holiday will last until 21 March 2021 so that means anyone who buys a property between now and then will benefit.

How does the LBTT holiday compare to normal?

The following table provides a comparison between how LBTT is normally applied and how it’s being charged at the moment.

* Please note that first-time buyers do not have to pay any LBTT up to £175,000

LBTT is a “progressive” tax, with the percentages building up as the value of the property increases.

If, for example, you decided to move home before 31 March 2021 and bought one for, say, £375,000, the LBTT you’d pay is worked out as follows:

Now, if you wait until after 31 March 2021 to buy the very same house at the very same price, here’s what the LBTT would cost:

As you can see, the LBTT holiday is an incentive for those who are thinking of moving to do so before 31 March 2021!

How does this work for first-time buyers?

If you’re a first-time buyer, you don’t pay any LBTT on any purchase up to £175,000. If you do buy for more than this, you only pay LBTT at the relevant rates up to the purchase price. What this means in practice is that first-time buyers save £600.00 in LBTT for any property they buy between £145,000 and £175,000.

What about the Additional Dwelling Supplement?

Regrettably, it’s still here. If you buy a second residential property you’ll have to pay the Additional Dwelling Supplement (ADS). The ADS is charged at 4% of the purchase price for any purchase over £40,000 and it’s payable in addition to any LBTT payable on the purchase.

One unintended consequence of ADS is that when someone buys their new home but can’t sell their existing home the ADS must be paid in addition to any LBTT due. However, in those circumstances, when the existing home is sold, you can claim back the ADS – provided it’s within 18 months of the second purchase date.

How can I quickly find out how much I have to pay?

Fortunately, you don’t have to sit down with a calculator to work out how much LBTT and ADS you need to pay. Revenue Scotland has developed an LBTT Calculator that you can access by clicking here. It’s sensible to check just how much LBTT you’ll pay to make sure you budget for it as part of your moving costs.