In light of COVID-19’s impact on the economy and housing market, the Scottish Government has approved legislation which means that the Land and Buildings Transaction Tax (“LBTT”) nil rate band for residential property purchases will increase.   LBTT will no longer be payable on property purchases where the value of the property is less than £250,000.  The new nil rate band came into effect on 15th July 2020 and will remain in place until 31st March 2021. 

The change in rates is illustrated in the tables below:-

15 July 2020 to 31 March 2021 

Purchase Price

LBTT rate

Up to £250,000

0%

Above £250,000 to £325,000

5%

Above £325,000 to £750,000

10%

Over £750,000

12%

Pre 15 July 2020

Purchase Price

LBTT rate

Up to £145,000

0%

Above £145,000 to £250,000

2%

Above £250,000 to £325,000

5%

Above £325,000 to £750,000

10%

Over £750,000

12%

 LBTT rates remain as before in respect of purchase prices which exceed £250,000. Buyers of properties over £250,000 in value will, however, still benefit from some tax relief in that LBTT will no longer be due at 2% on the value of the property between £145,000 and £250,000. The scrapping of the 2% rate equates to a tax saving of £2,100 in respect of transactions which exceed £250,000.

 As noted, the new rates will apply to transactions where the effective date is on or after 15th July 2020 (in the majority of cases, the effective date will be the date of completion, i.e. the date that the purchase price is paid by the buyer in exchange for the seller delivering the keys and disposition).

 Additional Dwelling Supplement (which is a tax charged at a flat rate of 4% on the purchase of a second property where the value of the property exceeds £40,000) rates and LBTT on commercial transactions remain unchanged.

 The changes follow the introduction of similar legislation in England which provides that Stamp Duty Land Tax will not be payable on residential transactions up to the value of £500,000 (provided that the transaction takes place between 8th July 2020 and 31st March 2021).