New tax if selling house in Scotland

[EddieReadersglasses]

Just wondering if anyone knows the ins and outs of this new tax.
We agreed to buy a house in January this year but it won't be built till July 2015. Tax changes mean it could cost us tens of thousands of £s more which makes it completely unaffordable. However we will conclude missives prior to the change in system. Does anyone know whether this means we will pay current stamp duty rates or still be stung with new higher tax rate (10% of sale price!)
Causing a huge amount of worry for us as currently looking like our dream house will just not happen

Trawling the internet for information but not much to be found

Under £135k, you pay nothing. Between £135,001 and £250k, you pay 2% of the sum that's over £135k, eg if property is £140k you pay 2% of the £5k, not 2% of £140k. From £250,001 to £1mil, you pay 10%, but again it's 10% of the sum that's over £250k; so, a £300k property will have the first £135 disregarded, 2% of the £135,001 - £250k, and then 10% of the £50k.

Does that make any sense?

Ah, sorry, misunderstood your question. I'd check with your lawyer, but I'd think if you're effectively paying before the changes, you'd pay current stamp duty.

No we would just be paying a % and concluding missives before April. Quite common to conclude missives early with new builds. Wouldn't be paying the rest till house ready next July

Write to John Swinney?

is it only houses, or commercial property as well?

It looks like millionaire housebuyers are unpopular in Scotland.

It's not 10%...it's £2300ish + 10% (of the purchase price - £250 000).

Once the missives are concluded and signed it's a done deal, so I'd assume it'll go through whatever tax system is in place at that point...but your solicitor should be able to tell you.

www.scotland.gov.uk/Topics/Government/Finance/scottishapproach/lbtt Non-residential properties are also affected, but the bands and % are different.

this bit looks perfectly sensible, it should be done in the rest of UK as well.

"The new rates, which come into effect in April, will only be payable on the proportion of the total value which falls within each band. This contrasts with the “slab” structure of stamp duty in which the higher tax rate is payable on the whole amount once the threshold is crossed."

Tabula
Purchase price is not 250k. We live in one of the most expensive parts of Scotland.
It will cost us an extra £25k in tax

Yes will apply to commercial as well.
I agree about the graduated levels of tax, problem is it jumps from 2% to 10%!!! Anyone paying more than 324k will be worse off.

oldlady thanks, I have just been on his website and emailed him my query. I imagine his mailbox will be pretty full.

If we assume that the purchase price of property is "what people are willing and able to pay" then an increased tax will to some extent reduce the selling price.

I expect there will be some tables published showing for different house prices the Stamp Duty payable and the new LBTT payable. Perhaps there will be winners and losers.

PigletJohn - it isn't just millionaire house buyers who the SNP hate - anyone selling a house worth over £324,000-ish will pay more under the new system than under Stamp Duty.

piglet
I agree, people will pay less for our house but our new build price has already been agreed so we will be hit twice effectively. Making it unlikely we can buy that house

Houses over a £1million will have to pay 12% for anything over that amount so I think no-one in parts of Edinburgh and Aberdeen will ever move again after April!

£324k doesn't buy much up here unfortunately

The thing is, while I do emphasise with anyone who gets caught in the changeover period and it causes hassle for them.

You can get 3 bedroom houses in most parts of Edinburgh for £325 000 and 5 bedrooms with land about 20 minutes outside of it for less than that.

With the exception of some very very small areas, that amount of money would get at least a decent family home and in some areas, 3 of them.

tabula we have 4 kids so 3 beds no use to us. I'm in Aberdeenshire not Edinburgh btw.
They are in process of building a new town near me, even for a 4 bed it's 400k plus cheapest 5 bed in that development at the moment is 600k.
These are not considered excessive prices up here and no we can't relocate further south as DH works in oil industry.

Do you honestly not thinking jumping from 2% to 10% is a bit extreme!! Why not have a 4,6,8% level between 250k and £1million??

I'm near Edinburgh...that's why I was using it as an example and because while it has some silly house prices, literally a 5 minute walk can make it much more reasonable.

It would make more sense to have an extra step on the way to 10%...it's just that I think the tipping point before it costs more than stamp duty is actually pretty fair.

I mean I'm sorry for you if it costs you a house (and I hope it doesn't) but nearly everywhere else you'd get a pretty impressive house for that money.

This is from the emailed market briefing from retties estate agents. Can't find it online I'm afraid.

Possible effects:

The market at the top end is likely to burn brightly for the next 6 months for deals to conclude by April 2015.-

Stock levels are rising already as people seek to tap the market before the new tax levels bite-

There could then well be a considerable lag in trading at the upper end as the market waits to digest pre April trading activity and put off confronting the higher levels-

Rural properties within commuting distance will start to trade again. The tax differential on 2,200sqft in Gala vs Morningside is now £41,000. Enough for 13 years of season tickets on Borders Railway.-

There is the danger that this will lead to the marginalisation of aspirational families looking to step up - in Edinburgh (combined) those paying between £350,000 and £500,000 will be paying £6 million more.-

This upper middle band of the market is likely to be most debilitated by the tax. The very rich won’t be too effected by an extra £50,000 of tax.-

Transaction taxes generally are extremely distorting. It will take time for the market to settle after they are introduced.-

Will the “shock” of adjusting to the new rates rapidly move the debate on to addressing the efficiencies in the approach to property

Eddie - I agree wholeheartedly about the way the tax leaps from 2% if your property is between £135,000 and £250,000, to 10% from £250,000 to £1,000,000, and then only by another 2% when the price is over £1,000,000.

Why are there not some more steps between 2% and 10%?

One would hope they will update annually. Which seems possible, given the rates are done by delegated legislation.

Also it's not really true that the rate is 10%, since it's a marginal rate.

Basically it's a tax cut for houses worth less than around £325k, a tax rise above that. Considering £325k is double the average Scottish house price, and the average detached house in Scotland costs only £225k, it seems fair enough.

SDT I'm glad someone can see what I'm talking about.
We will likely have to sell before April, move into rented for 4 months then move in July. Or more likely compromise and buy something not as good as the house we have been planning for the last 9 months.
The squeezed middle bears the brunt yet again.

I think they had the chance to do something far more progressive, but decided punishing people who are well off, but NOT wealthy - pretty normal people - was better.

It is the jump from 2% to 10% at £250K, no rise at all from £25K to £1 million, and then only a 2% rise however far over a million the price goes.

Why are there not a few more steps between £25K and £1 million? Why is it not more progressive? It clearly suggests to me a hatred for the better off, in the SNP.

Just wanted to say OP that DH and I are in almost the same position. We are in Aberdeen city and honestly most people just don't understand how massively inflated house prices are up here and how little £325,000 will buy you.

The date that is relevant to the stamp duty on the transaction is the date of settlement. ie the date you hand over the cash and the date that the seller (developer) hands over the keys, usually called the date of entry. This comes into force in April 2015.

If your purchase price is 400K then under existing SDLT you pay £12K and under new LBTT you pay £17.3K

You might have difficulty moving into rented for 4 months, OP, minimum AST is six months. Another expense to consider. In the meantime, have a look a few miles outside Aberdeen; I realise they won't be your dream home, but there are a fair few within your budget and of the size required within 30 miles.

Thanks bonbon prices are crazy up here and this will hit a lot of us hard.
oldlady even 6 months rental would be less of a hit than selling after April when prices are sure to drop significantly. However it would mean having to move twice in 6 months which would be a massive pain and stress. While we could move further away from Aberdeen this would mean the kids changing schools and starting again when we have spent the last decade making friends here.
I'm now thinking we will just have to stay where we are. I'm sure many others will be thinking the same and that could be a massive tax loss for the government.

The majority of Central belt will not really be affected, but it's going to cause big problems up here.

SDTG I totally agree btw it feels very punitive to me