Stamp Duty Cut for Scottish Homebuyers Introduced
Most homebuyers in Scotland soon won't need to pay transaction tax on the first £250,000 of a property's purchase price, under temporary measures announced recently by the devolved administrations in the wake of the stamp duty cut in England and Northern Ireland.
Normally, buyers in Scotland pay Land and Buildings Transaction Tax (LBTT) - equivalent to stamp duty in England and Northern Ireland - on properties costing over £145,000.
Scottish Finance Secretary Kate Forbes announced that this threshold would be raised to £250,000 for buyers in Scotland, with the new threshold coming into force on 15 July in Scotland and remaining in place until 31 March 2021.
The news follows Chancellor Rishi Sunak's announcement on 8 July that the stamp duty threshold would be raised to £500,000 in England and Northern Ireland, also until 31 March.
What is Land and Buildings Transaction Tax and how much does it cost?
This kind of tax is referred to by different names depending on where you are - stamp duty in England and Northern Ireland, land transaction tax in Wales and land and buildings transaction tax in Scotland. But the basic principle is the same - it's a lump-sum tax that you pay when buying a property that's worth more than a certain amount.
From 15 July in Scotland you'll pay nothing on properties purchased for up to £250,000.
For properties costing more than £250,000, the rates beyond this will remain unchanged - though you'll still make a saving if you buy a more expensive property due to the higher thresholds. So for example, if you buy a property for £300,000 in Scotland after 15 July, you'd pay £2,500 in land and buildings transaction tax (5% of the £50,000 above the threshold) - whereas before the changes, you'd pay £4,600.
How much will buyers save?
The total amount a buyer in Scotland can save under the temporary measures will depend on how much the property costs – as a general rule, the more expensive the property, the more you'll save (up to the maximum of £250,000).
The maximum you could save is £2,100 in Scotland for properties costing £250,000 or more.
But even on less expensive properties the savings may be significant. For example, if you're not a first-time buyer and you buy a property for £200,000 as your main home, you would usually pay £1,100 in Scotland. But once the temporary tax cut comes into effect, you'd pay nothing.
What if I'm buying a second home?
If you already own a home and you're buying an additional property - such as a second home or a buy-to-let property - worth more than £40,000, you'll have to pay an extra levy. The extra amount you'll pay is 3% of the total purchase price in Wales, England and Northern Ireland, and 4% in Scotland.
However when it comes to the temporary tax cut, Scotland and Wales are taking different approaches on second homes:
In Scotland, if you buy an additional property from 15 July, you'll still need to pay the extra 4% but will still benefit from the raised threshold for standard land and buildings transaction tax. So for example, if you buy a second home worth £200,000, you'd pay £8,000 rather than £9,100 in total.
For any questions you have relating to buying a new home and arranging your mortgage, it may help you to seek specialist advice. Our mortgage adviser, Graeme Nichols can provide you with advice on all aspects of mortgages and remortgaging your home. To find out more please browse some of our information here or contact us today by phone or email for a no-obligation chat.
Source: Naomi Schraer - July 2020 - moneysavingexpert.com