07 Apr 3% Levy on Second Home Property Transactions in Scotland
Delivering his budget, Mr Swinney announced there would be an additional supplement of 3% of the purchase price of the property, on top of the existing Land and Buildings Transaction Tax (LBTT).
What are the changes?
John Swinney, Scotland’s Finance Secretary has announced a 3% levy on any second property purchases which is beyond the purchaser’s main place of residence. This follows a similar move that the UK government announced last month for England and Wales. The aim is to address market issues faced by first time buyers.
The new levy will be an additional 3% taxation, on top of the existing LBTT charge and will come into effect on all transactions after the 1st of April 2016.
Property transactions between the value of £40, 000 and £144, 999 (which currently avoid tax) will now be affected. Property transactions below £40, 000 will still remain unaffected.
What does it take effect?
All transactions in the future and those whose missives were concluded on or after December 16th 2015 which are settled after April 1st will be affected.
Over the next couple of months, the market is highly likely to increase pace as property deals which have been in the pipeline are pushed forward in order to conclude before the cut-off date.
For buyers who have purchased but not yet sold their main residence, they will subject to the 3% charge, however if the first property becomes sold within 18 months, they are able to claim a refund. While the new changes are targeted at investors, they have the potential to leave thousands of regular property buyers facing huge additional costs when purchasing a new home.
What to do if you’re affected
If you are in the process of purchasing a priority, ensure you are aware of proposed settlement dates, as running behind schedule could cost you a few extra thousands.
Even if there are only a few days between your purchase and sale, according to the proposals, you will still be liable to pay the LBTT supplement on your purchase.