Everything You Need to Know if You're a First-Time Buyer in Scotland

If you're a first-time buyer in Scotland then there are several schemes available to help you to get onto the property ladder. From tax relief to government loans, here are the initiatives available to help you buy your first home.

Tax relief saves first-time buyers up to £600

The Land and Buildings Transaction Tax (LBTT) is a property tax in Scotland and replaced Stamp Duty north of the border in April 2015.

The rate of tax payable is determined by the property purchase price, with residential properties up to the value of £145,000 paying a nil rate of tax, rising to 12% for properties worth over £750,000.

New legislation that came into force in July 2018 means that, as a first-time buyer, you now benefit from additional LBTT tax relief. The change means that the zero-rated LBTT threshold has been raised from £145,000 to £175,000 for first-time buyers.

So, if you're a first-time buyer purchasing a property in Scotland for up to £175,000 you now pay no LBTT.

If you’re a first-time buyer paying more than £175,000 for a property, you’ll see your LBTT bill reduced by £600. This is because you’ll benefit from tax relief on the proportion of the purchase price that is below the higher threshold.

The Scottish Fiscal Commission (SFC) has independently estimated that this policy will benefit around 12,000 first-time buyers every year. This is equivalent to around 80% of all first-time buyers in Scotland.

Help to Buy Scotland

The Help to Buy Scotland Affordable New Build Scheme is designed to help you to get on the property ladder with an affordable new build home in Scotland.

Under the scheme, the Scottish government takes an equity stake of up to 15% of the total value of your property. You'll generally need a deposit of at least 5%, so you’ll need to secure a repayment mortgage for the remaining 80% of the property value from a Help to Buy lender.

The scheme applies to new-build homes only from participating builders, and there is a maximum qualifying property value of £200,000. And, the property must be your only residence, meaning you can't own another residential property.

In summary:

• Your deposit will typically need to be 5% or more of the purchase price
• Your deposit and mortgage together must cover at least 85% of the full property value
• The Scottish government will give you equity to cover the remaining 15% of the property price.

Low-Cost Initiative for First Time Buyers (LIFT)

LIFT covers a range of Scottish government schemes designed to help people onto the housing ladder. These initiatives include:

• New Supply Shared Equity Scheme – this allows first-time buyers to buy a new-build property from either a builder or a housing association
• New Supply Shared Equity Developers trial and Developers Scheme – as above, but this involves sales by private builders who have been approved by the government
• Open Market Shared Equity – this lets you buy any property on the open market, and is available to all creditworthy first-time buyers. You take a stake in the property of between 60% and 90%, with the balance being a government loan provided by a social landlord. There are purchase price limits depending on the region of Scotland you're buying in
• Shared Ownership – here, you buy a part share of a property and pay 'rent' on the unpurchased share. This scheme is being phased out and only a limited number of homes can be purchased in this way.

Figure show that over three quarters (76%) of those supported into home ownership by the Help to Buy Scotland and the LIFT (Low-Cost Initiative for First Time Buyers) schemes are young people aged 35 and under.

New government proposal to offer equity loans to first-time buyers

In addition to the above initiatives, the Scottish government has recently announced a new £150 million scheme to help first-time buyers get onto the property ladder.

If you can find a 5% deposit to purchase your new home, you will be able to borrow up to £25,000 to fund or top-up your deposit. There will be no restriction on property types, no upper purchase price limit and joint buyers will be able to take advantage of the scheme even if only one of you is a first-time buyer.

The loan will be secured on the equity of your home, and repaid when the property is sold.

There are advantages to this scheme as:

• it is not restricted to new build properties
• there are likely to be no age restrictions on first-time buyers wanting to apply
• it is a 'cash' loan rather than an 'equity' loan. This means you will only repay what you borrow (plus interest), rather than having to pay a percentage of your equity which could be more if your property has increased in value

Announcing the scheme, Nicola Sturgeon said that a pilot scheme would open in late 2019 and run until 2021.