It has been announced that the Scottish Government are going to increase the starting threshold for paying Land and Buildings Transaction Tax (LBTT) for all residential properties from £145,000 to £250,000.

This move follows the footsteps of England and Northern Ireland when the Stamp Duty Land Tax (SDLT) ‘holiday’ was imposed whereby all property purchases in England and Northern Ireland are exempt from SDLT payments on purchase prices up to £500,000.

The change will have a significant impact on many purchasers across Scotland (particularly first-time buyers who will now be able to add more funds towards their deposit). Generally, the changes will mean that eight out of ten purchasers across Scotland will have no tax to pay at all.

However, it is not clear when this change will take effect as a start date has not been announced. Finance Secretary, Kate Forbes, said that the change would be introduced “as soon as possible”. This contrasts with the announcement made by the chancellor who said the changes would come into force with immediate effect for property transactions across the border.

Further, it is not clear whether Additional Dwelling Supplement Tax will also form part of the ‘tax holiday’ or how the tax exemption will affect ongoing transactions. It is unclear whether the LBTT exemption only applies to new purchases going forward that do not yet have a concluded contract or whether it could apply retrospectively to transactions that although concluded have not yet settled due to Covid-19.

The cut in LBTT should definitely be considered a positive change however the uncertainty about when the LBTT holiday begins may cause purchasers to delay submitting offers until the rules surrounding the tax cut have been clarified and this could stall the market.

Further, the Government has announced measures to boost the property market by pouring an extra £50 million into the First Home Fund which should equate to helping another 2000 first time buyers start their climb up the property ladder.

The First Home Fund scheme was introduced to assist first time buyers in affording their first property and works by offering purchasers up to £25,000 towards the cost of buying a home. The Government then takes an equity share in the property in exchange for the loan and the homeowner will repay the Scottish Government when they sell. However, they can pay it off earlier and there are no monthly payments charged nor any interest on the loan during ownership.

These changes are productive and hopefully will help the economy to grow as the property market across the UK picks up.

Contact our Property Lawyers at The McKinstry Company

If you have any queries regarding the Government’s announcement or if you are thinking of moving house then please do not hesitate to get in touch with our property lawyers at The McKinstry Company.