New Scottish property tax bands hit the prime market, but create ‘more winners than losers’

Scotland’s Finance Secretary John Swinney has set out the new-look detail for the new Land and Buildings Transaction Tax (LBTT), which is lined up to replace SDLT in Scotland from...
LBTT Vs SDLT - Knight Frank

Scotland’s Finance Secretary John Swinney has set out the new-look detail for the new Land and Buildings Transaction Tax (LBTT), which is lined up to replace SDLT in Scotland from April this year.

Following George Osborne’s revamp of the UK Stamp Duty system in December, Swinney seems to have pitched it just about right, promising that around half of all household transactions won’t pay any tax at all, while only those spending more than £945,000 will pay more than under the current system.

Kicking in on 1st April (none of that “here’s a few hours to get your houses in order” that Osborne subjected us to), the new regime lowers the threshold for the top-rate 12% charge, from £1m down to  anything above £750,000, but softens the jump by introducing a new 5% rate to help the middle ground.

Here are the new Scottish LBTT rates:

Property price

New LBTT rate











The original LBTT rates were:

Property price

Old LBTT rate









And here are the current SDLT rates for comparison:

Property price

SDLT rate











90% of Scottish taxpayers will be “better or no worse off” than under the UK Stamp Duty system, says Swinney. 99.9% of residential transactions will pay less LBTT or no LBTT at all, compared to the proposed rates and bands in October.

High value homeowners, however, have not been let off lightly. Anyone buying a home for more than £945,000 will pay more in tax under the new plans, compared to Scotland’s Draft Budget proposals.

It’s worth remembering that the new rates will only be payable on the portion of the total value which falls within each band.

Here’s a handy chart from Knight Frank:LBTT Vs SDLT - Knight Frank

Finance Secretary John Swinney: “In October, the Draft Budget provided me with the honour of being the first Scottish Finance Minister for 308 years to set national tax rates. Even that experience didn’t prepare me for the even greater honour of seeing the design of my national tax being replicated across the UK in the Chancellor’s Autumn Statement less than two months later.

“I have always been clear that I intended for the devolved taxes to be revenue neutral and that the design of the taxes and the associated bands would be influenced by the four maxims set out by Adam Smith, particularly that taxes should be proportionate to the ability to pay. These principles underpinned the tax proposals in the Draft Budget.

“One consequence of the Chancellor’s announcement in December is that the amount of revenue I am required to raise to meet that principle of revenue neutrality is lower than anticipated at the time of the draft budget.

“In order to remain true to my principle that the first rates and bands of the devolved taxes should be revenue neutral, it is only right that I review the proposed tax rates which I set out last October. In doing so I will remain true to all of the principles that I established in October.

“My priority was then, and remains now, to help first-time buyers to enter the housing market and to assist people as they progress through the property market. Consistent with the principle that tax should be proportionate to the ability to pay, the burden of taxation should fall on each according to their ability.

“Tax rates should also be designed to support the Scottish market. The average house price in Scotland is £170,000. The average detached house is around £244,000. In contrast the average house price in London is £510,000.

“With 50 per cent of transactions lifted out of tax altogether, the measures I am proposing today send a very clear message.

“The priorities set out in the Draft Budget reflected those we established in the Government Economic Strategy but were influenced by the aspirations so tangibly expressed in the Referendum campaign, a desire to live in more prosperous and much fairer country than we do today.

“In exercising its first judgments on national taxes, this Government has put fairness, equity and the ability to pay at the heart of what it has done. Where we have power to do so, this Government will do all it can to help people in Scotland enter the housing market, because it is the right thing to do for our economy and our communities.”


The new rates seem to have gone down well with the property industry, although – as ever – there are dissenting voices calling it a missed opportunity:

Help for the modest

Oliver Knight, Knight Frank Residential Research: “We welcome the fact that the government has considered feedback from the industry on LBTT and has revised the rates accordingly.

“Today’s changes will help lessen the tax burden of those purchasing fairly modest family homes in core locations of Scotland. Under the original LBTT rates, homebuyers in Edinburgh, Aberdeen and parts of Glasgow – where prices for larger family houses tend to be higher – would all have seen a sharp rise in the up-front cost of moving.

“The new LBTT rates mean that the threshold at which buyers will pay more tax compared to the current UK stamp duty system has risen from £254,000 to £330,000.”

Help for the middle

Edward Douglas-Home, Head of Edinburgh City Sales at Knight Frank: “The new rates are likely to be welcomed by homebuyers, especially in Edinburgh where the cost of housing is higher relative to the rest of the country. The biggest beneficiaries will be middle income families looking to move up the housing ladder.

“The average cost of a detached family home in Edinburgh is around £390,000, rising to a lot more in some parts of the city, such as in Morningside, The Grange and Murrayfield, as well as for the terraced town houses of New Town and the West End. Under the original rates proposed a property of this value would have been liable for a £16,300 tax bill. The revised rates mean the LBTT charge for the same property will now be £12,350, or 24% less.

“The new bands should help to keep the market fluid and ensure that the recovery in prices and transactions that we have seen over the few years continues.

“However, buyers purchasing property valued at over £947,500 will be faced with a higher tax bill than under the original LBTT levy and a significantly higher bill when compared to current UK stamp duty rates. Prior to the introduction of the new tax in April, we expect to see an increase in the number of prime sales and homes coming to the market as both buyers and vendors look to move before costs rise.”

New rates create more winners than losers

Scott Brown, Estate Agency Partner at Warners Solicitors and Estate Agents: “Today’s announcement has created more winners than losers in Scotland.

“First time buyers and those buying up to £325,000 will be better off – in that they will pay less tax than now – from 1 April.

“For those buying a property above that sum, they will pay more in stamp duty in Scotland than in England – but the changes means they are paying less tax in terms of the original LBTT proposals.

“However, those buying above £750,000 will certainly be paying far more going forward.

“With this announcement, there are more winners than losers – and those at the lower price range are helped the most which helps the property market and the economy as a whole. We need people to be able to buy their first homes to let others buy further up the ladder.”

A blow to everyone but the lower end of the market

Andrew Rettie, head of estate agency for Strutt & Parker in Scotland: “While LBTT will help first time buyers – the average price of a house in Scotland is £170,000 – it has been widely derided as an unfair attack on families and a punitive tax on aspiration, particularly in the affluent centres of Glasgow, Edinburgh and Aberdeen. The changes announced today are no better.

“Strutt & Parker backed the Scottish Conservatives’ proposals for the introduction of a mid-tier rate of 5% between £250,001 and £500,000 and we were hopeful that Mr Swinney would introduce something along those lines but while this review offers a concession to the lower end of the market it is a blow to everyone else and a missed opportunity to provide a fillip to the property. If families can’t upsize because of the increase in tax, they will not sell, leading to a stalemate in the middle of the market, which is really the engine room of a thriving housing sector.

“We are very busy at present with buyers and sellers aiming to complete deals before the April 1 deadline. However, once LBTT comes into effect we anticipate buyers will be more cautious in their offers to take account of the heavier tax burden.”

The already heavily taxed middle classes will be picking up the tab

Andrew Perratt, Savills Head of Residential Property in Scotland: “John Swinney should be commended for listening to the views of Faisal Choudhry, Savills Head of Research in Scotland, and other property specialists.  It is good news for home ownership generally that 50% of buyers are now property tax free. However, it remains the case that the already heavily taxed middle classes will be picking up the tab for LBTT (Land and Building Transaction Tax) in Scotland, which could impact the higher end of the market.

“There is still a yawning gap between the favourable stamp duty rates for the rest of the UK, introduced by the Chancellor in his autumn statement, and the new LBTT rates, which will be payable in Scotland from April this year.

“Scotland is the most ‘searched for’ location on Savills international website outside London and, despite higher levels of tax, it still offers excellent value compared with London and the south.

“For example, around £775,000 will buy a two bedroom upstairs flat in Fulham, including SDLT. The same outlay will buy you a four bedroom Victorian villa with gardens in a comparable Edinburgh suburb, including your LBTT payment.  As such, Scotland remains incredible value for money.

High levels of property tax are normally associated with booming markets, but the Scottish property market, though improving, is still fragile.”

Theres a LBTT Calculator here.

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