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What Will Switching Property Transactional Tax Cost Scotland?

In April 2015 the UK Stamp Duty Land Tax (SDLT) and landfill tax will be ‘switched off’ in Scotland and replaced by the Land and Buildings and Transactions Tax (LBTT) rates.

Additionally, the ‘block grant’ that Scotland receives from Westminster will be reduced to the corresponding amount.

The initial rates, which are detailed in the draft Scottish budget for 2015/2016, have been noted as “progressive in nature” and “welcome” by commenters. However, there is speculation that under the rates and bands, which have been announced, that LBTT for residential purchases will be more than SDLT would have been for homes over the approximate value of £325,000. This means that those that purchase larger family homes, particularly in the bigger cities, are likely to pay more in tax than under the SDLT regime.

In terms of commercial property, LBTT would be higher than the corresponding SDLT change on purchases over £2million.

This means that investors buying commercial property in Scotland will be forced to pay more in transactional fees than if they purchase elsewhere in the UK. The result of this being that it will discourage investment on new offices, retail and industrial properties in Scotland, with other locations possessing less start-up barriers. 

Despite claims of this negative impact on the construction industry and wider economy, the Scottish Government maintain that the new taxes will be “revenue neutral”, stating that they will levy the same tax as their predecessor over the same period.  

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