Scottish stamp duty shake-up could help homebuyers
Many homebuyers in Scotland could benefit from lower stamp duty rates within two years, after a bill passed last week enabling the country to set its own rates for the first time.
From April 2015 the Land and Buildings Transaction Tax will replace the UK Government's system of stamp duty in Scotland. (See our 50 House Buying Tips for help wherever you are in the UK.)
Under an example proposed by the Scottish Government, those buying properties under £300,000 will pay less than under the current system, while those buying properties over £300,000 will pay more.
The Scottish Government also wants to raise the current tax-free threshold on properties costing up to £125,000 to £180,000.
As the average house price in Scotland is £134,611 compared to £168,941 in the UK, according to Nationwide, many homebuyers would benefit from the Scottish's Government's plans.
How definite is this?
The new rates won't be set until September 2014, but the Scottish Government says it wants to introduce a system where the amount of tax paid is more closely related to the value of the property, particularly to help first-time buyers get on the property ladder.
Stamp duty is a lump sum tax which anyone buying a property or land costing more than a set amount has to pay. The rate you pay the tax at varies, based on the price of the property.
The current system is often seen as unfair, as there's a considerable difference in what people in each tax band pay – a penny's difference in a house price for example, could result in a £5,000 difference in the tax you pay.
If you buy a property costing costing £250,000, you'll be charged 1% in tax, resulting in a £2,500 bill. But if it costs £250,000.01, you'll be charged 3%, landing you with £7,500 to pay.
What does the Scottish Government want?
The Scottish Government wants properties to pay a rate that is more representative to the property's value.
The table below shows an example created by the Scottish Government of how the new system may work. However, this won't be confirmed until next September:
Comparing stamp duty systems
Property price | Tax paid under current UK system | Tax paid under possible Scottish system |
|---|---|---|
£125,001 | £1,250 | 0 |
£150,000 | £1,500 | 0 |
£180,000 | £1,800 | 0 |
£190,000 | £1,900 | £750 |
£200,000 | £2,000 | £1,500 |
£250,001 | £7,500 | £5,250 |
£300,000 | £9,000 | £9,000 |
£350,000 | £10,500 | £12,750 |
£400,000 | £12,000 | £16,500 |
£450,000 | £13,500 | £20,250 |
£500,001 | £20,000 | £24,000 |
£550,000 | £22,000 | £27,750 |
£600,000 | £24,000 | £31,500 |
£650,000 | £26,000 | £35,250 |
£700,000 | £28,000 | £39,000 |
£800,000 | £32,000 | £46,500 |
£900,000 | £36,000 | £54,000 |
£1,000,001 | £50,000 | £61,500 |
£1,250,000 | £62,500 | £80,250 |
£1,500,000 | £75,000 | £99,000 |
£1,750,000 | £87,500 | £124,000 |
£2,000,001 | £140,000 | £149,000 |
£2,500,000 | £175,000 | £199,000 |
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3 September 2024
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