Over two years prior to the historic independence referendum in September 2014, the Scottish Parliament had been given significant additional powers under the Scotland Act 2012.

These powers included the ability to lower or raise income tax rates by up to 10 pence in the pound as well as control over stamp duty.

Since 2003, Stamp Duty Land Tax (SDLT) has been the tax applied on the purchase of land and buildings throughout the UK.  Tax rates have been consistent and the tax payable identical, whether a property was being purchased in Dundee or Derby.

This similar treatment is about to end.  In October the Scottish Government announced the rates and bands for the new Scottish equivalent for SDLT, Land and Buildings Transaction Tax (LBTT), to take effect from 1^st April 2015.  This was designed as a revenue neutral approach with the most expensive properties paying for lower costs for the majority of property buyers.  The “tipping point” was £325,000.  For purchases less than this amount, less tax would be payable; for purchases above this figure, more tax would be due.

One aspect of the old system which often caused a distortion in the housing market was the sharp increase in tax rates above certain thresholds.  For example it was always a challenge to sell a property valued at £260,000 as the SDLT rate jumped from 1% to 3% at £250,000.  Any purchase above £250,000 was charged at 3% on the full price, not just the proportion above this threshold, resulting in an immediate £5,000 tax hit on crossing the £250,000 barrier.  LBTT has progressive tax rates, eliminating these artificial distortions.

Then, on 3^rd December 2014, during his Autumn statement, the Chancellor, George Osborne, announced a very similar reform to SDLT.  This immediately introduced UK wide changes to the rates of tax and thresholds.  These are different from the Scottish LBTT rates which are due to take effect next April and means that the “tipping point” will now be £254,000.  In other words, in Scotland it will be more expensive to buy a property in excess of this amount than it would to buy a similar priced property in England.

The Scottish Government estimates that 80% of home buyers will be either no worse off or better off under LBTT than the recently reformed SDLT.  However the effects will be felt differently in various parts of the country.  According to official figures, in the third quarter of 2014, the average price of a property in Scotland was £170,000.  In Aberdeen it was £221,000.  The latest ASPC figures show that the average price for a detached house in Aberdeen is £360,000.  Until the end of March the tax due on a purchase at this level will be £8,000.  From 1^st April 2015 the tax payable will jump to £13,300.  This will only apply in Scotland – an equivalent purchase in England will still incur the £8,000 tax charge.

Here are figures to illustrate the changes:-

It remains to be seen how these tax changes will affect the Scottish property market. There may be a rush to buy and sell higher priced properties in the first quarter of 2015, prior to the new tax rates taking effect.  Lower priced properties are already benefiting from the lower rates which have applied since the beginning of December.

2014 has been a good year for both property sale volumes and sale prices in the Aberdeen area, with the number of sales and prices returning to levels not seen since the 2008 downturn.  It will be interesting to see how LBTT impacts on the local market in 2015.

For further information regarding SDLT/LBTT or property purchase or sale generally, please contact Brian Sutton by email at This email address is being protected from spambots. You need JavaScript enabled to view it. or on 01224 581581.