Swinney modifies LBTT proposals

House buyers in Scotland at the low to middle end of the scale will benefit from revised rates to the new land and buildings transaction tax proposed by Finance Secretary John Swinney today – but those buying more expensive properties will still pay far more than under stamp duty land tax.

Mr Swinney's changes will mean no tax being paid on a purchase price up to £145,000, compared with the £135,000 previously announced and the £125,000 under the new stamp duty land tax rates in force since Chancellor George Osborne's Autumn Statement. A rate of 2% will then apply on the part of the price between £145,000 and £250,000 – paralleling the 2% SDLT between £125,000 and £250,000 – and the rate then goes up to 5%.

However, whereas the 5% SDLT band covers any balance of the price up to £925,000, under LBTT if the price exceeds £325,000 the previously proposed rate of 10% still applies to the part of the price above that figure. Further, the top rate of 12% will now apply to any part of the price above £750,000, down from the previous £1m threshold. 

The higher rates of SDLT are 10% between £925,000 and £1.5m, and 12% above £1.5m.

Mr Swinney's new proposals mean that a buyer at £145,000-£250,000 will pay £200 less than previously proposed, at £325,000-£750,000, £3,950 less, but at £1m and above, £1,050 more. The price above which a purchaser will pay more than under Mr Swinney's previous plans is £947,500.

Any purchase above £333,000 will be taxed more heavily under LBTT than under SDLT. A £750,000 house now attracts SDLT of £27,500, but the LBTT payable will be £48,350.

The Scottish Government says that the new figures will mean 50% of all household transactions paying no tax and over 40,000 buyers paying less on the purchase of a new home; 90% or purchasers will be "better or no worse off" than under SDLT.

Isobel d’Inverno, convener of the Law Society of Scotland’s Tax Law Committee, commented: “We are pleased to see today’s review of the new land and building transaction tax rates – this was a necessary step for the Scottish Government to fulfil its original promise that the tax would be revenue neutral.

“The revised levels proposed in today’s budget announcement mean that first-time homebuyers in Scotland will not be put at a disadvantage compared to those elsewhere in the UK when the new tax comes into effect in April this year."

All the above calculations are the editor's arithmetic.