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Transaction tax cut for homebuyers in Scotland and Wales until April

Transaction tax cut for homebuyers in Scotland and Wales until April

Most homebuyers in Scotland and Wales soon won't pay transaction tax on the first £250,000 of a property's purchase price, under temporary measures announced by the devolved administrations in the wake of the stamp duty cut in England and Northern Ireland last week.

At the moment, buyers in Scotland pay land and buildings transaction tax (LBTT) – equivalent to stamp duty in England and Northern Ireland – on properties costing over £145,000. Those in Wales pay land transaction tax on properties over £180,000.

But Scottish Finance Secretary Kate Forbes announced last week that this threshold would be raised to £250,000 for buyers in Scotland, while Welsh Finance Minister Rebecca Evans said today that the same threshold will also apply in Wales.

The new £250,000 threshold will come into force on Wednesday 15 July in Scotland and on Monday 27 July in Wales, and will remain in place until 31 March 2021.

The news follows Chancellor Rishi Sunak's announcement on Wednesday 8 July that the stamp duty threshold would be raised to £500,000 in England and Northern Ireland, also until 31 March 2021.

Use our Stamp Duty Calculator to see how much stamp duty or land transaction tax you have to pay (we're in the process of updating this with the new figures for Scotland and Wales). Also see our Mortgages & Homes section for more help, including our Remortgage GuideFirst-Time Buyers' Guide and Mortgage Best Buys Calculator.

What is land transaction tax and how much does it cost?

This kind of tax is referred to by different names depending on where you are – stamp duty in England and Northern Ireland, land and buildings transaction tax in Scotland and land transaction tax in Wales. But the basic principle is the same – it's a lump-sum tax that you pay when buying a property that's worth more than a certain amount.

The key differences are the thresholds, meaning you'll pay different rates depending on where you are.

At the moment in Scotland, you pay:

  • Nothing on properties purchased for up to £145,000 (this is raised to £175,000 for first-time buyers).
  • 2% on the portion of a property between £145,001 and £250,000. 
  • 5% on the portion of a property between £250,001 and £325,000. 
  • 10% on the portion of a property between £325,001 and £750,000. 
  • 12% on the portion of a property costing over £750,000.

In Wales you'll pay:

  • Nothing on properties purchased for up to £180,000.
  • 3.5% on the portion of a property between £180,001 and £250,000.
  • 5% on the portion of a property between £250,001 and £400,000.
  • 7.5% on the portion of a property between £400,001 and £750,000.
  • 10% on the portion of a property between £750,001 and £1,500,000.
  • 12% on the portion of a property costing more than £1,500,000.

But from Wednesday 15 July in Scotland and Monday 27 July in Wales, you'll pay nothing on properties purchased for up to £250,000.

For properties costing more than £250,000, the rates beyond this will remain unchanged – though you'll still make a saving if you buy a more expensive property due to the higher thresholds. So for example, if you buy a property for £300,000 in Scotland after Wednesday 15 July, you'd pay £2,500 in land and buildings transaction tax (5% of the £50,000 above the threshold) – whereas before the changes, you'd pay £4,600.

How much will buyers save?

The total amount a buyer in Scotland or Wales can save under the temporary measures will depend on how much the property costs – as a general rule, the more expensive the property, the more you'll save (up to the maximum of £250,000).

The maximum you could save is £2,100 in Scotland and £2,450 in Wales, for properties costing £250,000 or more. 

But even on less expensive properties the savings may be significant. For example, if you're not a first-time buyer and you buy a property for £200,000 as your main home, you would usually pay £1,100 in Scotland and £700 in Wales. But once the temporary tax cut comes into effect, you'd pay nothing.

What if I'm buying a second home? 

If you already own a home and you're buying an additional property – such as a second home or a buy-to-let property – worth more than £40,000, you'll have to pay an extra levy. The extra amount you'll pay is 3% of the total purchase price in Wales, England and Northern Ireland, and 4% in Scotland.

However, when it comes to the temporary tax cut, Scotland and Wales are taking different approaches on second homes:

  • In Scotland, if you buy an additional property from Wednesday 15 July, you'll still need to pay the extra 4%, but will benefit from the raised threshold for standard land and buildings transaction tax. So for example, if you buy a second home worth £200,000, you'd pay £8,000 rather than £9,100 in total.

  • In Wales, if you buy an additional property from Monday 27 July, you'll still need to pay the extra 3%, but WON'T benefit from any increased threshold for standard land transaction tax. So if you buy a second home, you'll pay exactly the same as you would now.