The Scottish Budget delivered a blow for landlords and holiday home buyers, introducing a 1% increase around the tax payable when buying another property.
The Scottish Government intends to boost the surcharge buy-to-let landlords and second house buyers pay on Land and Building Transactions Tax – the Scottish same as stamp duty – from 3% to 4%.
If the proposal meets the approval of the Scottish Parliament, the rate rise can come into force from 25 January 2022.
Which? explains the change and just what it means for the money.
How is LBTT changing?
The Additional Dwelling Supplement (ADS) was introduced round the UK on 1 April 2022 and it is payable when you’re buying a second residential property (along with your main home).
It means that people buying second homes or buy-to-let property pay one more 3% over the regular LBTT rates.
But in today’s Budget speech, the devolved Scottish government proposed raising the LBTT surcharge from 3% to 4%.
LBTT is really a tiered tax, meaning you have to pay different rates on several portions of the property price. This table shows the rates:
|Portion of property price
|Standard residential LBTT rate
|Current ADS rate
|ADS rate from 25 January 2022
|Properties worth less than lb40,000
The change implies that a buy-to-let landlord purchasing a home for lb250,000 might find their bill rise from lb9,600 to lb12,100.
Calculate your buy-to-let LBTT
You can use our LBTT calculator to work out the LBTT you’re likely to pay when purchasing another home or buy-to-let property in Scotland.
Why is this happening?
The Scottish Government says the rise towards the surcharge is an integral part of their drive to aid first-time buyers and assist people because they move up the home ladder.
The Commission forecasts the tax revenue raised from increasing the rate of ADS is going to be lb2.3m in 2022/19, rising to lb25.4m in 2022/20.
How stamp duty works in Scotland
If you're buying a property in Scotland you'll ordinarily have to pay Land and Buildings Transaction Tax (LBTT). This replaced stamp duty land tax in April 2022, but many people still think of it as ‘stamp duty’ or ‘Scottish stamp duty’.
LBTT is used to residential and commercial land and buildings transactions.
Like stamp duty, LBTT is really a tiered system, however the rates and property pricing bands vary from the English and Welsh systems.
When will the rate change?
The Scottish Government's plan to increase the ADS rate can come into force from 25 January 2022 if it is authorized by the Scottish Parliament.
However, the 4% surcharge will not apply if the contract for a transaction was applied for just before today (12 December 2022).
The Budget included as well an agenda to increase the wages tax thresholds for Scottish taxpayers.
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