Buying a home in Scotland? New tax rates come into force today

The Land and Buildings Transaction Tax (LBTT) has today come into force in Scotland replacing the UK Government's system of stamp duty, which until 4 December 2014 was deemed unfair by many.

Before this date across the UK, the tax rate paid was applied to the whole purchase price once a property went over a threshold. So at a purchase price of £250,000, a home buyer would have paid £2,500 in stamp duty, but at £250,001, they'd pay £7,500.

However this changed in England, Scotland, Wales and Northern Ireland following last year's Autumn Statement, when the old slab system was scrapped in favour of a marginal rates one. The new system works like income tax, where you get a tax-free allowance, and then pay a different rate of tax for each portion of the price.

See MoneySavingExpert.com's Stamp Duty Calculator to work out exactly how much tax you'll have to pay.

What are the new Scottish tax rates?

From today home buyers in Scotland will pay the following in tax when they buy a home:

How much tax will I pay?

Isn't this different to what was initially proposed?

The original proposals for Scotland made in October last year differ to the rates taking effect today (see the Scotland scraps 'slab' stamp duty system in favour of proportional rates MSE news story).

This is because Scotland's finance secretary John Swinney said the amount of revenue he was required to raise was lower than anticipated at the time of the draft budget last autumn, and so the proposed tax rates were reviewed and revised earlier this year.

A new 5% band for properties costing between £250,001 and £750,000 was included and the 0% tax band was increased for properties costing up to £145,000, up from the initial £135,000 proposed.

Swinney says that over 40,000 buyers will pay less on the purchase of a new home and 90% of tax payers will be better or no worse off under the Scottish system than under the UK stamp duty scheme.

The original rates planned for Scotland were as follows:

Proposed Scottish tax rates

Homebuyers in Scotland will today pay a new marginal rate of tax

What about stamp duty in England, Wales and Northern Ireland?

The stamp duty system in England, Wales and Northern Ireland mirrors the Scottish system, though the purchase price thresholds differ. Under this system, you pay the following:

What stamp duty rate will I pay?