Understandably, the mere mention of changes to taxes can cause concern. However, the benefits of the proposed changes from stamp duty to the Scottish Government’s Land and Buildings Transaction Tax (LBTT) far out stripes any initial misgivings.
These are the first taxes to be levied by a Parliament in Scotland for over 300 years. The LBTT is a progressive tax introducing a nil rate for properties up to £135,000 in price; 2% on any additional cost up to £250,000; 10% on money from £250,001 to £1,000,000; and 12% is the rate for anything over £1,000,000.
Under the changes a first time buyer, purchasing a house worth £130,000 would now pay nothing under the new tax. Under stamp duty they would have paid £1300. A property at £140,000 would have a tax of £100, saving £1300 against stamp duty. The tax charge on the average house price in Scotland (£162,000 in April to June 2014), will be reduced by £1080 from £1620 to £540. For £238,000 home buyers would now pay £2060, £320 less than stamp duty which is £2380.
For example, on a home sold for £260,000 - LBTT will be £3,300 compared to a stamp duty of £7,800. For a house costing £300,000 LBTT is £7300 while stamp duty is currently £9000 on the same transaction. It is only at £325,000 that LBTT and stamp duty even out, and anything over could have less tax under the current system.
Simply put, the tax helps first time buyers and those who are on lower incomes get on the property ladder. Additionally the new rates mean 90% of homebuyers will either pay less or the same amount as they would under stamp duty.
In Aberdeenshire, where the average house price is around £215,000, there is no doubt these changes will be better than the current system for both buyers and sellers.
A tax replacing an old broken one which is beneficial to over 90% must be novel in more ways than one!