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Potential LBTT revisions for Scotland

Tuesday 27 June 2017

Finance secretary Derek Mackay has said he will consider changes to Scotland’s property purchasing tax amid falling revenues and growing criticism.

The finance minister for Scotland has said he is open to reexamining the Land and Buildings Transaction Tax (LBTT) bands in a move that could save homebuyers thousands of pounds.

The land and buildings transaction tax (LBTT), Scotland’s first domestic tax in more than 300 years, was introduced in 2015 by Mackay’s predecessor, John Swinney, to replace UK stamp duty on house purchases. 

Currently in Scotland, LBTT is not paid on properties that cost less than £145,000 or on the first £145,000 of the price. Higher-priced properties are then taxed by band: two per cent on the next £105,000 (£145,000 to £250,000); five per cent on the next £75,000 (£250,000 to £325,000), 10 per cent on the next £425,000 (£325,000 to £750,000), and 12 per cent on anything above £750,000.

For example, someone buying a house worth £425,000 in Scotland would have to pay £15,850 in LBTT, compared to a property of the same price in England which would cost a buyer £11,250 in stamp duty fees.

Experts have blamed LBTT for a sharp fall in mid-market sales and the government has admitted that the tax is expected to raise almost £800 million less than originally forecast during this parliament.

Ministers had previously remained firm on LBTT bands but Mackay has said he was willing to consider amending the bands to extend the five per cent levy to properties worth up to £500,000, halving the amount of tax that buyers of homes in that price range currently pay.

If the change goes ahead, it could create an average saving of £9,000 to those affected.

Derek Mackay commented:

“I’m not an ideologue on this issue. We want the tax to function well and if there’s a case that an amendment of the current bands could help stimulate the housing market in that range, and the revenue it raises, then I will consider it. It’s early days. It’s normal to review policies.”

Murdo Fraser, Scottish Conservative shadow finance secretary, said:

“If Derek Mackay does perform a u-turn on LBTT rates it will be well overdue. For months now experts have told us that the high rates set by the SNP were stifling the market and leading to a drop off in sales. with revenue projected to be down hundreds of millions of pounds from what was expected, it’s clear that the Finance Minister has made a huge error of judgment.”

Keep-up-to date with practical and legislative guidance with Revenue Scotland, who are responsible for the management and collection of Scotland’s devolved taxes. Each month they provide information and data on LBTT and SLfT, as well as how to guides and useful documents for your business.