How Scottish First-Time Buyers Can Save £600 On Their Property Purchase
First-time buyers in Scotland are set to benefit from a new tax relief that came into force this July.
Changes to the Land and Buildings Transaction Tax (LBTT) that came into effect on 1 July 2018 will see around four in five first-time buyers pay no tax on their property purchase.
Keep reading to find out more about how you could save hundreds of pounds in tax if you’re a first-time buyer in Scotland.
Tax relief set to save 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 first-time buyers 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.
Any first-time buyer purchasing a property in Scotland for up to £175,000 will 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 each year. This is equivalent to around 80% of all first-time buyers in Scotland.
Analysis by the SFC says that of the 12,000 buyers expected to benefit, 7,000 of these will pay £600 less in tax, and a further 5,000 will save an average of £290.
Tax relief could result in 200 additional property sales every year
Minister designate for public finance and digital economy, Kate Forbes, said: “From now, around 80% of first-time buyers will pay no LBTT, helping thousands of people across the country buy their first home. Our progressive approach to the setting of LBTT rates and bands prioritises support for first-time buyers and helps others as they move through the market.
“Alongside our shared equity schemes, the introduction of this new relief provides further support to first-time buyers and delivers on the commitment made by the Scottish Government as part of the 2018/19 Scottish budget.”
UK Chancellor of the Exchequer Philip Hammond announced a similar tax break on properties of up to £300,000 last year. The Scottish government’s changes mirror this and adjust it for the unique property market north of the border.
SFC researchers estimate the change will drive an extra 150 to 200 property sales each year.
The tax change comes on the back of other initiatives in Scotland designed to help buyers onto the property ladder. Over three quarters (76%) of those supported into homeownership by the Help to Buy Scotland and the LIFT (Low-Cost Initiative for First Time Buyers) schemes are young people aged 35 and under.
Recent figures show that the number of young people aged 30 and under supported via Help to Buy (Scotland) increased from 50% to 55% in 2016/17.
SNP looking to ‘make taxation fairer’
The Scottish National Party (SNP) said that its LBTT reforms, which also include a clamp down in tax avoidance, meant it continued to ‘lead the way on making taxation fairer’.
Scottish Labour’s finance spokesman James Kelly MSP welcomed the tax change but said that more work had to be done to solve Scotland’s housing crisis.
He said: “While relief from LBBT is welcome for first-time buyers, a comprehensive strategy is required to tackle the housing crisis. Too many people are locked in high rent private properties which is freezing them out of being able to purchase a house or flat for the first time.”