There are several benefits to being a First-Time Buyer in Scotland
As things stand at the present they fall into 3 main categories:
Savings Bonuses; and
Shared Equity / Shared Lending Schemes.
Generally speaking, tax is due on all residential property purchases in Scotland, over the value of £145,000.
The purchaser will be required to pay Land and Buildings Transaction Tax (LBTT), which replaced Stamp Duty Land Tax (SDLT) on 1st April 2015. The amount payable depends on the purchase price, as per the follow tax bands:
The good news for First-Time Buyers is that an LBTT Relief is available, of up to £600, for any purchase taking place on or after 30th June 2018. This means that the 0% LBTT threshold is increased for First-Time Buyers, from £145,000 to £175,000. The tax bands above will continue to apply to any First-Time Buyer purchase over and above £175,000.
Revenue Scotland administer LBTT, rather than HMRC, as it is a Scottish property tax.
More details on this relief, and the conditions which must be met, can be found on the Revenue Scotland website here.
The Scottish Government’s website also has information about this tax relief, which can be found here.
There are 2 main savings bonus schemes available for First-Time Buyers:
1) Help to Buy ISA.
This is a savings account that First-Time Buyers were able to open until 30th November 2019 with most UK high street banks. No new Help to Buy ISAs can be opened after that deadline.
If you opened a Help to Buy ISA on or before 30th November 2019, you can pay in up to £200 of savings each month. The UK government will then top up your savings by 25% (up to a bonus of £3,000) when you buy your first home. If you are buying jointly with someone who also has a Help to Buy ISA, both of you will get the 25% bonus.
As an example, for each £1,000 of savings per person, the UK government will pay £250 interest, as a bonus, provided the conditions of the ISA are fulfilled (primarily that the savings are used to buy your first home, and provided that the purchase is for a property in Scotland that does not exceed £250,000).
More information about Help to Buy ISAs can be found on the UK government’s website, here.
2) Lifetime ISA
If you missed the deadline for opening a Help to Buy ISA, all is not lost! The UK government will also pay you a 25% interest bonus if you save for your first home using a Lifetime ISA.
You must be 18 or over but under 40 to open a Lifetime ISA. You can put in savings of up to £4,000 per year, until you turn 50 (when you turn 50, you will not be able to pay into your Lifetime ISA or earn the 25% bonus. Your account will stay open and your savings will still earn interest or investment returns).
The UK government will add a 25% bonus to your savings, up to a maximum of £1,000 per year.
The Lifetime ISA bonus can be claimed when you buy your first home, but also once you turn 60, or if you are terminally ill (with less than 12 months to live).
There is a 25% charge payable by you if you withdraw cash or assets from a Lifetime ISA for any other reason.
More information about Lifetime ISAs can be found on the UK government’s website, here.
Shared Equity / Shared Lending Schemes
A Shared Equity or Shared Lending Scheme involves the government taking a stake in the property you buy, which is then returned to them in the future (usually when you sell the property).
Under a typical Shared Equity Scheme you would own a proportion/percentage of the property, with the scheme provider owning the remaining share.
Under a typical Shared Lending Scheme, on the other hand, you would own 100% of the property, but the scheme provider would have a security over the property, like a mortgage, which would result in them receiving their share in return in the future (usually when you sell the property).
There are 3 main Shared Equity / Shared Lending Schemes available for First-Time Buyers:
1) First Home Fund
This Scheme provides First-Time Buyers with up to £25,000 to help buy a property that meets your needs and is located in the area where you want to live. The Scottish Government provides funding in exchange for a percentage share of the property. You must obtain a mortgage from a specified list of lenders to be eligible for funding from the First Home Fund. The minimum mortgage amount must also be 25% of the purchase price.
The First Home Fund Scheme will support the purchase of new builds and existing homes. You must reside in the house as your main residence, and there is an administration fee of £550 payable upon application to the Scheme (this will be refunded if the application is unsuccessful). Where buying a house jointly with someone else, only one of the buyers need to be First-Time Buyer.
More information about the First Home Fund can be found on the Scottish government’s website, here.
2) Help to Buy (Scotland) Affordable New Build Scheme
As the name suggests, this Scheme relates to affordable new build property only. It is open to First-Time Buyers and existing homeowners, and can assist with up to 15% of the purchase price of a new build home.
The Help to Buy (Scotland) Affordable New Build Scheme aims to help both First-Time Buyers and existing homeowners buy an affordable new build home where this is sensible and sustainable for them to do so.
It will operate until 31st March 2021.
The new build property price must not exceed £200,000, and there are set conditions relating to the type of property that is eligible, and the type of mortgage you are able to obtain if you want to benefit from the Scheme.
More information about the Help to Buy (Scotland) Affordable New Build Scheme can be found on the Scottish government’s website, here.
3) LIFT Scheme (Low-Cost Initiative for First Time Buyers)
The Scottish Government may also be able to help you as a First-Time Buyer, through what is known as the LIFT Scheme, provided you meet the means-tested criteria.
As the LIFT Scheme is aimed at households with low to medium incomes, you will need to be able to show that you cannot afford to buy a home that meets your needs without help from the Scheme. If it looks like you’d be able to buy a home without any help, your application will not be eligible.
There are two types of LIFT Scheme, depending on whether the property you are looking to buy is being sold on the open market, or is a new build home from a council or housing association.
More information about the LIFT Scheme can be found on the Scottish government’s website, here.
DISCLAIMER: We strongly suggest that independent financial advice should be obtained before any property transaction is entered into, or if any of the products or services mentioned in this article are opened, created, or otherwise entered into.
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