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More households in Scotland could potentially see the upfront cost of moving rise when the new Land and Building Transaction Tax rates come into force in April 2015, a new analysis suggests. In October, during the draft Scottish Budget, John Swinney, the finance secretary, announced that from April next year Scotland would be scrapping the current stamp duty system and replacing it with a LBTT. At the time the Scottish government said that up to 90% of home buyers would be better off under the new regime but this was before Chancellor George Osborne announced stamp duty reforms last week. Following the LBTT announcement real estate firm Knight Frank looked at the numbers and found that, based on the rates announced and compared to the stamp duty system that was in place across the UK at that time, the new LBTT would favour buyers of properties at £325,000 or less, where less tax would be payable. Sales above £325,000 would incur a higher rate of tax. However, the firm has now re-done the calculations based on the stamp duty changes which will apply in Scotland until the change and the point at which it now becomes more expensive to buy a property under the new LBTT system has fallen from £325,000 to £254,000. Knight Frank says that this means that a lot more households could potentially see the upfront cost of moving rise when the LBTT rates come into force in April. According to figures from the Registers of Scotland, the average price of a detached property is higher than £254,000 in nearly a third of all the local authorities in the country. Under the current system, a house costing £390,000 will incur a stamp duty payment of £9,500, whereas the upfront costs under the new LBTT system for the same property will be 72% higher at £16,300. ‘Prior to the introduction of the new levy in four months’ time, 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,’ said Oliver Knight. ‘Homes worth £250,000 plus accounted for 72% of the total £215 million stamp duty take in Scotland last year. The new regime could hit receipts at this end of the market if there is a slowdown in transactions, and perhaps raise questions among policy makers about the rate structure,’ he added. Continue reading →

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