Proposed first-time buyer relief from land and buildings transaction tax: consultation

Introduction

1. Land and Buildings Transaction Tax ( LBTT), which replaced UK Stamp Duty Land Tax ( SDLT) in Scotland from 1 April 2015, is a tax applied to residential and non-residential land and buildings transactions (including commercial leases) where a chargeable interest is acquired.

2. Since introduction of the tax, the Scottish Government’s policy priority in setting the rates and bands for residential LBTT has been to help first-time buyers enter the property market and assist people as they progress through the market.

3. In line with that, the Cabinet Secretary for Finance and the Constitution announced plans in the Scottish Government draft Scottish Budget for 2018/19 for a new LBTT relief for first-time buyers in Scotland up to £175,000.

4. Whilst no changes are being made to the rates and bands directly, the relief will have the effect of raising the zero tax LBTT threshold for first-time buyers, of any age, from £145,000 to £175,000. First-time buyers buying a property above £175,000 will also benefit on the portion of the price below the threshold. The Scottish Fiscal Commission forecast that this will result in 80 per cent of first-time buyers in Scotland paying no LBTT at all, whilst all other first time buyers will see their tax reduced by £600. Overall this policy is estimated to help 12,000 first-time buyers each year.

5. In order to introduce the relief, the Land and Buildings Transaction Tax (Scotland) Act 2013 (‘ LBTTSA 2013’) must be amended. To achieve this, secondary legislation, in the form of a new Schedule, must be introduced to and agreed by the Scottish Parliament. A draft Statutory Instrument is included as part of this consultation at Annex A. This will be refined and revised in the light of responses to this consultation and prior to its introduction to Parliament.

6. The first-time buyer relief will complement a range of measures already put in place by the Scottish Government to support homebuyers and the provision of new homes in Scotland. This includes our LIFT schemes, which support first time buyers on lower incomes (as well as a limited range of other specified priority groups) to buy new and existing homes. In addition, first time buyers may access support through the Help to Buy (Scotland) Affordable New Build scheme to buy new properties only.

7. As the Scottish Government has already signaled its intent to introduce the relief, the consultation does not seek views on whether or not the relief should be introduced or on the £175,000 threshold which will be set.