WIREDGOV

50 per cent of homebuyers to pay no tax

Finance Secretary John Swinney has set out new tax rates which will see 50 per cent of all household transactions paying no tax and over 40,000 buyers paying less on the purchase of a new home.

Land and Buildings Transaction Tax (LBTT) – will replace UK Stamp Duty Land Tax from April 2015. The new rates and bands were announced to parliament as part of the Stage One debate on the Scottish Budget 2015/16.

Around 10,000 house purchases which would currently be liable for UK Stamp Duty will be removed from tax by the new proposals.
The marginal rates, for the first taxes to be set in Scotland for 300 years, will provide additional benefit to first-time buyers and those at the lower end of the housing market and ensure that the tax charged is proportionate to people’s ability to pay.

With effect from the 1st April 2015:

• To provide further support for First Time buyers the threshold for beginning to pay LBTT will be increased to £145,000 – taking 50% of transactions, or another 10,000 homes out of tax altogether compared to current system of Stamp Duty. 
• A marginal rate of 2% will apply to transactions between £145,000 and £250,000; 
• A new marginal rate of 5% will be introduced between £250,000 and £325,000 restoring the benefit for those buying properties up to the value of £330,000;
• Between £325,000 and £750,000 the marginal rate will be 10% 
• In order to ensure that we are able to provide benefits for those at the bottom of the market, whilst retaining the principle of proportionality, the top rate of 12% will now affect all transactions above £750,000.

As a result of the rates set out recently:

• 90% of tax payers better or no worse off than under UK Stamp Duty Land Tax
• more than 90,000 taxpayers will be better or no worse off under the Scottish system than under UK Stamp Duty Land Tax,
• all those buying a residential property in Scotland for £330,000 or less will pay up to £400 less tax under LBTT, or will pay no tax at all.
• 99.9% of residential transactions will pay less LBTT or no LBTT at all, compared to the proposed rates and bands in October. Only those buying a home for more than £945,000 will pay more in tax under our new plans, compared to our Draft Budget proposals.

Finance Secretary John Swinney said recently:

“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. 

Notes To Editors

The tax rates and bands announced recently are still to be approved by the Scottish Parliament. The Scottish Government will seek Parliament’s approval of formal rate-setting Orders which will be laid in early February.

Revenue Scotland will administer the Land and Buildings Transaction Tax (LBTT). It will work closely with Registers of Scotland (RoS) to prepare for LBTT.

The Scottish Government’s tax forecasts have been reviewed by the independent Scottish Fiscal Commission and considered consistent with the October forecasting methodology which was described as reasonable.

The new rates will only be payable on the portion of the total value which falls within each band.

LBTT calculators are available on the Revenue Scotland website – see www.revenue.scot.