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Scottish Budget 2018: LBTT Scottish stamp duty surcharge to rise to 4%

The change could mean thousands of pounds extra on landlords' LBTT bills

The Scottish Budget delivered a blow for landlords and holiday home buyers, introducing a 1% increase on the tax payable when buying a second property. 

The Scottish Government plans to increase the surcharge buy-to-let landlords and second home buyers pay on Land and Building Transactions Tax – the Scottish equivalent of stamp duty – from 3% to 4%.

If the proposal is approved by the Scottish Parliament, the rate rise will come into force from 25 January 2019.

Which? explains the change and what it means for your money.

  • If you’re considering buying a property in Scotland and want advice on the best mortgage for you, call Which? Mortgage Advisers on 0800 197 8461.

How is LBTT changing?

The Additional Dwelling Supplement (ADS) was introduced around the UK on 1 April 2016 and is payable when you’re buying a second residential property (in addition to your main home).

It means that people buying second homes or buy-to-let property pay an additional 3% on top of the regular LBTT rates.

But in today’s Budget speech, the devolved Scottish government proposed raising the LBTT surcharge from 3% to 4%.

LBTT is a tiered tax, meaning you pay different rates on different portions of the property price. This table shows the rates:

Portion of property price Standard residential LBTT rate Current ADS rate ADS rate from 25 January 2019
Properties worth less than £40,000 0% 0%
£0-£145,000 0% 3% 4%
£145,001-£250,000 2% 5% 6%
£250,001-£325,000 5% 8% 9%
£325,001-£750,000 10% 13% 14%
£750,001+ 12% 15% 16%

The change means that a buy-to-let landlord purchasing a home for £250,000 will see their bill rise from £9,600 to £12,100.

Calculate your buy-to-let LBTT

You can use our LBTT calculator to work out the LBTT you’re likely to pay when buying a second home or buy-to-let property in Scotland.

Why is this happening?

The Scottish Government says the increase to the surcharge is an important part of its drive to support first-time buyers and assist people as they move up the property ladder.

The Commission forecasts the tax revenue raised from increasing the rate of ADS will be £2.3m in 2018/19, rising to £25.4m in 2019/20.

Find out more: LBTT: stamp duty in Scotland

How stamp duty works in Scotland

If you’re buying a property in Scotland you will normally have to pay Land and Buildings Transaction Tax (LBTT). This replaced stamp duty land tax in April 2015, but many people still refer to it as ‘stamp duty’ or ‘Scottish stamp duty’.

LBTT is applied to residential and commercial land and buildings transactions.

Like stamp duty, LBTT is a tiered system, but the rates and property pricing bands differ from the English and Welsh systems.

When will the rate change?

The Scottish Government’s plan to increase the ADS rate will come into force from 25 January 2019 if it is approved by the Scottish Parliament.

However, the 4% surcharge will not apply if the contract for a transaction was entered into prior to today (12 December 2018).

The Budget also included a plan to increase the income tax thresholds for Scottish taxpayers. You can find out more in our story: Scottish Budget 2018 – will you need to pay more income tax next year?

Get advice on your mortgage options

If you’re considering buying a property in Scotland, whether it’s a buy-to-let or for you to live in, Which? Mortgage Advisers can give you expert, friendly advice. For a free consultation, call 0800 197 8461 or fill in the form below for a free callback.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Which? Limited is an Introducer Appointed Representative of Which? Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.

Categories: Money, Mortgages & property

Please note that the information in this article is for information purposes only and does not constitute advice. Please refer to the particular terms & conditions of a provider before committing to any financial products.

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