Knight Frank property comment on new LBTT rates

Oliver Knight, Knight Frank Residential Research, comments:

“We welcome the fact that the government has considered feedback from the industry on LBTT and has revised the rates accordingly.”

“Today’s changes will help lessen the tax burden of those purchasing fairly modest family homes in core locations of Scotland. Under the original LBTT rates, homebuyers in Edinburgh, Aberdeen and parts of Glasgow – where prices for larger family houses tend to be higher – would all have seen a sharp rise in the up-front cost of moving.”

“The new LBTT rates mean that the threshold at which buyers will pay more tax compared to the current UK stamp duty system has risen from £254,000 to £330,000.”

Edward Douglas-Home, Head of Edinburgh City Sales at Knight Frank, comments:

“The new rates are likely to be welcomed by homebuyers, especially in Edinburgh where the cost of housing is higher relative to the rest of the country. The biggest beneficiaries will be middle income families looking to move up the housing ladder.”

“The average cost of a detached family home in Edinburgh is around £390,000, rising to a lot more in some parts of the city, such as in Morningside, The Grange and Murrayfield, as well as for the terraced town houses of New Town and the West End. Under the original rates proposed a property of this value would have been liable for a £16,300 tax bill. The revised rates mean the LBTT charge for the same property will now be £12,350, or 24% less.”

“The new bands should help to keep the market fluid and ensure that the recovery in prices and transactions that we have seen over the few years continues.”

“However, buyers purchasing property valued at over £947,500 will be faced with a higher tax bill than under the original LBTT levy and a significantly higher bill when compared to current UK stamp duty rates. Prior to the introduction of the new tax in April, we expect to see an increase in the number of prime sales and homes coming to the market as both buyers and vendors look to move before costs rise.”

Land and Building Transaction Tax (LBTT)

The Scottish Government has revised its residential tax rates for the new Land and Buildings Transaction Tax (LBTT), as a result of the Chancellor’s overhaul of the Stamp Duty Land Tax (SDLT) regime in December.

The LBTT will replace the SDLT in Scotland from April this year, as part of the devolution of limited tax powers to the Scottish Parliament. The initial rates announced for consultation were higher than the new rates which will take effect from April, as shown in the table below.

This means that someone purchasing a home worth £400,000 from April will pay £13,350 in LBTT, rather than £17,300 initially suggested by the Scottish Government.