Scotland has introduced a new land and buildings transaction tax, using the Scottish parliament’s first new taxation powers in more than 300 years.
The LBTT will replace stamp duty land tax and will be charged at 10% of the purchase price of a home between £250,000 and £1m and 12% for more expensive properties.
Buyers of cheaper properties will pay less than under the current system.
The announcement was made as part of the draft Scottish Budget 2015/16, announced yesterday.
The new rates will only be payable on the portion of the total value which falls within each band.
This contrasts with the “slab” structure of stamp duty under which the higher tax rate is payable on the whole purchase price when a threshold is crossed.
The Scottish government said the rates would take an extra 5,000 house purchases out of tax by ensuring that nobody paid tax on the first £135,000 of their house purchase - £10,000 higher than the current stamp duty threshold.
John Swinney, finance secretary, said the old stamp duty was “outdated” causing unfair tax hikes at set property prices.
Doug Smith, chairman of CBRE in Scotland, said the announcement would see a higher tax burden falling on larger transactions.
Smith said: “In itself, this announcement may appear to have little significance beyond those having an interest in the Scottish property market whether as home owners, investors or occupiers.
“With wider devolved powers en route to the Scottish Parliament following the No vote last month, this is the first time that we can see how the current Scottish administration might seek to apply such powers.”
David Melhuish, director at the Scottish Property Federation, warned: “The property markets in Scotland have improved over the last year but we are concerned that the higher rates proposed for LBTT are too penal, and that this may have a negative impact on future growth in the property markets and potentially for future development investment as a whole. If Scotland is to thrive in a competitive property investment market, we do not want to risk being seen as a high tax environment, as this could dent investor confidence due to fears about further future tax increases.”