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Scottish property market hampered by LBTT

Scotland’s housebuilding industry has expressed concern over the impact of the land and buildings transaction tax (LBTT) following its introduction in April 2015.

Responding to a call for evidence from the Scottish Parliament’s finance committee, trade body Homes for Scotland (HFS) said the tax was having an adverse impact on the middle to upper end of the Scottish housing market.

For residential property transactions, the rate of tax is determined by reference to percentages of the chargeable consideration for the transaction falling within the bands below:


Purchase price

LBTT rate

Up to £145,000


Above £145,000 to £250,000


Above £250,000 to £325,000


Above £325,000 to £750,000


Over £750,000


If the purchase price is above the nil rate tax band of £145,000, LBTT is charged at the appropriate rate on the amount of the chargeable consideration within the relevant bands. For example, a house bought for £280,000 is charged at:

+ 0% for the first £145,000, then

+ 2% for the next £105,000

+ 5% for the next £30,000 and

+ so £3,600 must be paid in LBTT

HFS policy director Karen Campbell said: “The impact of the new rates and bands varies between market segments but a real additional burden has been placed on some buyers and this is clearly affecting sales as many people are choosing not to move as they find the cost too high.

“There is also a disproportionate effect in regions such as Aberdeen, Aberdeenshire and Edinburgh where the average family home commonly exceeds £325,000.”

Highlighting the problem, Campbell pointed to an example of a new four bedroom family home in Edinburgh costing £475,000 with a LBTT payable of nearly £21,000 - £6,600 more than what was due under the previous UK Stamp Duty system and £7,100 more than in England. 

She added: “Given that people purchasing at the higher end of the market tend to be discretionary movers,  meaning they are choosing to move rather than having to because of circumstance, our concern is that, by staying put, they block others from progressing onto or up the property ladder and thus exacerbate the country’s housing crisis.

 “That is why we are suggesting that the current five per cent band be extended up to the price ceiling of £925k, mirroring the position south of the border to help ensure Scotland remains an attractive place in which to invest.

“This is all the more important given the fact that LBTT generated lower than expected receipts from housing transactions in its first year, with the gap plugged by income from the non-residential sector.  It remains to be seen if this could be achieved again given the already evident post-Brexit impact on commercial property investment.”

  • MMi Legal

    It is an interesting article. As one of the largest conveyancing legal firms in Scotland, over the last few weeks we have been running a series of news items looking at the impact of Brexit upon the Scottish property market. Our latest piece http://www.mmilegal.com/a-10-seconds-survey-the-richest-neighbourhood-in-scotland-and-our-brexit-property-series-part-3/ delves much further into the problem highlighted in the article.

    The bottom line is that governments of all colours operate taxation of property which simply does not work and is aiming at the wrong target. Any negative impact of Brexit will exacerbate the problems which are endemic to the LBTT system. And if there is a negative reaction to Brexit, it will be amplified by the way that LBTT is undermining the mechanism of the Scottish property market and its overall volume. Our articles explain that the taxation problem will be felt least in Edinburgh but is already a meaningful problem elsewhere.

    This is not a problem about expensive houses or rich people but rather about the economic benefit from the housing market and the availability of opportunity in Scotland. It is doubtful that anybody will take the action needed to remedy this problem until it is too late but we can only hope.

    You can find more at our website www.MMIlegal.com

    McVey and Murricane, Solicitors, Glasgow


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