This afternoon John Swinney, Cabinet Secretary for Finance, Employment and Sustainable Growth in the Scottish Government, made history by announcing the rates of Land and Buildings Transaction Tax (LBTT) and Scottish Landfill Tax, the first new Scottish Taxes since 1707. The taxes will apply in Scotland from 1 April 2015.
LBTT will apply to all land transactions within Scotland. Stamp duty land tax (SDLT), which currently applies to land transactions, was a "slab tax" so the whole price was charged at one rate, determined by the total consideration paid. LBTT is a progressive tax, like income tax, so the proportion of the consideration in each tax band will have a different rate of LBTT applied to it. Details of the rates are set out below. The rate of LBTT which will apply to non-residential leases remains the same as the SDLT rate which applies to leases.
The Scottish Government's press release which accompanied the announcement of the rates states that as a consequence of the difference between the LBTT and SDLT rates, 90% of homebuyers will pay less or the same amount of tax. Those acquiring a house for consideration in excess of £325,000 will pay more tax.
The rates which will apply to acquisitions of non-residential properties were also announced. The Scottish Government has stated that the effect of these rates is that acquisitions with consideration of less than £2m will pay less tax.
We still await confirmation of how certain types of transaction will be treated, in particular sub-sales of non-residential property. A further update will be issued as soon as more information is available.
In addition to the LBTT rate, the Scottish Landfill Tax rate which will apply to disposals to landfill sites in Scotland was also set, at a higher rate of £82.60 per tonne and a lower rate of £2.60 per tonne.
LBTT and Scottish Landfill Tax are the first taxes to be devolved to Scotland. Scotland will be allowed to keep the revenue raised by the taxes and there will be a corresponding cut in the block grant received.
Residential Property LBTT Rate Non Residential Property LBTT Rate
(applied like income tax)
Up to £135,000 Nil Up to £150,000 Nil
£135,000 to £250,000 2% £150,000 to £350,000 3%
£250,000 to £1m 10% Over £350,000 4.5%
Over £1m 12%