January 2021 – 1st Time Buyer Relief – LBTT

Author: Mitchells Roberton
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Introduction

  • Land and buildings transaction tax (“LBTT”) is the Scottish version of “stamp duty land tax”. In practice, LBTT is payable mainly in two cases: (1) the purchase of land including in particular residential property, and (2) the grant or transfer of leases of non-residential property. LBTT is payable by the person acquiring the interest who is, in any case, referred to as “the “buyer”.
  • This note is primarily about one specific aspect of the purchase of residential property i.e. the LBTT relief which a “first time buyer” may get. But first there is an outline of the rates at which LBTT is charged to give some context to the points about first-time buyer relief.
  • The date ranges in the tables below include references to the “effective date” of a transaction. The “effective date” is normally the date the transaction completes and the price is handed over in exchange for the keys.

LBTT residential rates and bands from 15th July 2020 to 31st March 2021

  • The following LBTT rates apply for residential transactions with an “effective date” between 15th July 2020 to 31st 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%
  • These rates were brought in temporarily with effect from 15th July 2020 in response to the coronavirus pandemic (by the snappily-titled Land and Buildings Transaction Tax (Tax Rates and Tax Bands) (Scotland) Amendment (No. 2) (Coronavirus) Order 2020). The effect of this temporary measure was to increase the “nil rate band” at which no LBTT is payable from £145,000 to £250,000.

LBTT residential rates and bands (1) pre-15th July 2020 and (2) as from 1st April 2021

  • In the Scottish Budget this month it was announced that the rates would go back to what they were before the temporary coronavirus increase in the 0% rate band. So, before 15th July 2020 and with effect from 1st April 2021 the LBTT rates and bands for residential transactions are:
 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%

 

  • As regards the policy in relation to this the Scottish Budget announcement said:

 

“The temporary change to the residential LBTT nil rate band introduced in July 2020 has provided support for Scotland’s housing market at a difficult time, and helped contribute to a robust recovery throughout the year to date.

However, as intended, for transactions with an effective date from 1 April 2021 onwards, the ceiling of the nil rate band for residential LBTT will return to £145,000.”

First-time buyer relief

  • But the announcement went on to say:

“First-time buyers will continue to be able to claim the first-time buyer relief, which has the effect of raising the nil rate band [from £145,000] to £175,000 and results in a reduction of tax of up to £600.” 

  • The relief for first-time buyers was introduced from June 2018 (by the also snappily-titled Land and Buildings Transaction Tax (First-Time Buyer Relief) (Scotland) Order 2018). The relief consists in LBTT not being payable in respect of the first £175,000 of the price or “consideration” paid. Hence the quote above refers to a maximum saving of £600 i.e. £175,000 (the increase in the nil rate band for first-time buyers) minus £145,000 (the normal nil rate band) =  £30,000 x 2% (the rate of tax for the first band) = £600.

Who counts as a first-time buyer? 

  • As one would expect you can only get the relief if you are buying a “dwelling” which you will live in as your only or main residence and have not previously been a “buyer” of a dwelling.
  • If you are buying somewhere jointly with another the relief will only be available if each buyer meets all the relevant criteria. If any of the buyers does not meet all the conditions then the relief will not be available.
  • Some of the rules are perhaps less obvious. For example, as the Revenue Scotland website says: to qualify as a “first-time buyer” you cannot own – nor have previously owned –  a dwelling “in Scotland, the rest of the UK or the rest of the world”.

Note: This material is for information purposes only and does not constitute any form of advice or recommendation by us. You should not rely upon it in making any decisions or taking or refraining from taking any action. If you would like us to advise you on any of the matters covered in this material, please contact Alison Gourley: email ajg@mitchells-roberton.co.uk

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