Scottish Budget 2019 - Property Transaction Taxes
The 2019 Scottish Budget was presented in December 2018, although it was easy to miss this news with Brexit dominating the headlines! The two main areas of note were changes to property transaction taxes (LBTT) and to income tax thresholds. We’ll cover income tax in the next article so will deal with LBTT here.
LBTT replaced Stamp Duty Land Tax in Scotland in 2015 and is payable on most property purchases. There are separate rates and bands for residential and non-residential purchases and it is the latter that were altered in the recent budget. LBTT is a progressive tax in the style of income tax, with separate elements taxed at progressively higher rates. As a result of this budget the lower rate band for non-residential transactions, starting at £150,001, has seen a rate reduction from 3% to 1%. The upper rate band (there are only two tax-bearing bands for non-residential LBTT) has seen the threshold fall from £350,001 to £250,001, and the tax rate rise from 4.5% to 5%.
The effect of this is that purchases where the property element of the consideration is between £150,001 and £349,999 will see the LBTT bill cut, by up to a maximum of £2,000 (this maximum saving applies to transactions at £250,000), but where the consideration exceeds £350,000 the LBTT liability will increase.
The second change to LBTT in this budget concerns the ADS (Additional Dwelling Supplement), which is payable when individuals purchase a second home, such as one intended for letting, or when entities such as limited companies purchase any residential property. The ADS is an additional charge on top of the standard LBTT, on any such purchase exceeding £40,000. The Scottish budget increased this tax from 3% to 4%, effective from 25 January 2019, an effective increase of 33%.