Scottish finance secretary John Swinney has introduced the land and building transaction tax – Scotland’s first independent tax rate in three centuries – which will see homebuyers paying a progressive rate of tax on property purchases. Property purchases between £250,001 and £1m will be subject to a 10% levy, while any property priced above £1m will face a 12% charge. No charge will be applied on purchases up to £135,000, and a 2% charge will apply to those up to £250,000. The new taxes will come into effect from April.
Source: Financial Times
This may be slightly misleading to readers used to the present “slab” system of SDLT as it currently operates in the UK. It does not mean that someone who pays (for example) £300,000 for a Scottish property will face a tax bill of £30,000. Unlike SDLT, the Land and Building Transaction Tax which will replace SDLT in Scotland from April 2015 will operate on “bands”. So the LBTT on a £300,000 property will be 0% on the first £135,000, 2% on the next £115,000 and 10% on the last £50,000 – a total of £7,300. This contrasts with SDLT currently due which is simply 3% of £300,000.
A “banding” arrangement is generally considered to be rather fairer (if transaction taxes are ever “fair”) than a “slab” system (which creates enormous marginal rates of tax) and it will be interesting to see if the design of LBTT creates pressure on the UK government to change SDLT in the same way.