In her draft Scottish Budget on 28 January 2021, Kate Forbes, MSP, the Cabinet Secretary for Finance announced a change to the Land & Building Transaction Tax (LBTT) threshold. She advised that the threshold above which LBTT is payable would revert to £145,000 (£175,000 for first-time buyers). This change will come into effect on 1 April 2021.
In July last year, following an easing of the lockdown which had, effectively, closed down the property market, the Finance Secretary announced that the LBTT threshold would increase to £250,000. This meant that anyone buying a property below £250,000 would pay no LBTT. It also meant that those who bought for more than £250,000 would save £2,100 in LBTT.
This was a big saving for those who were looking to buy and supported the very busy property market activity between July last year and now.
Interestingly, it was also reported that despite the increase in the threshold, before which no LBTT was paid, the amount of revenue raised through this tax actually increased by some margin in the last quarter of 2020, when compared with 2019.
The reversion back to the original rates now means that anyone buying a property for more than £145,000 will have to pay the LBTT. The Finance Secretary pointed out that there was still an exemption for first-time buyers who don’t have to pay any LBTT for any purchase up to £175,000. This amounts to a saving of £600.
The property market continues to be very busy as we move into the second month of 2021 and it is likely that this move may well cause those planning to buy to move into the market sooner, rather than later, to gain advantage of the higher threshold.
This might not be the final decision on this tax. The Chancellor of the Exchequer will deliver the UK Budget on 3 March 2021. In July last year, the Stamp Duty (the English equivalent of LBTT) threshold was raised to £500,000. Should the Chancellor decide to extend this for buyers south of the border, it will give the Finance Secretary pause for thought. Will she concede and extend current threshold in Scotland to the same date, or will she press ahead with her plans?
We also have to remember that the Scottish Budget is presented as a draft Budget, and needs the support of other parties at Holyrood to get through. If the Chancellor does extend the higher relief currently in place in England and the Finance Secretary signals that she isn’t prepared to do the same, will politicians in other parties refuse to agree to this element of the Scottish Budget? We’ll see. Check back with us on 4th March 2021 to find out.