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Buy to let investors in Scotland could be hit with further costs as the LBTT surcharge for second home buyers is due to rise.
LBTT (Land Building Transactions Tax) is the Scottish equivalent of stamp duty, and the Scottish government in their budget has announced plans to increase the surcharge for second home owners and buy to let investors from 3 per cent to 4 per cent.
If the proposal is approved by the Scottish Parliament, the rate rise will come into force from 25 January 2019.
The Additional Dwelling Supplement (ADS) was introduced around the UK on 1 April 2016 and is payable on the purchase of additional residential properties.
It means that people buying second homes or buy to let property will pay an additional 3 per cent on top of the regular stamp duty rates.
However, in the Budget speech this week, the devolved Scottish government proposed raising the LBTT surcharge from 3 per cent to 4 per cent.
The Scottish Government has stated that the increase to the surcharge is an important part of its drive to support first-time buyers and assist people as they move up the property ladder. The Commission forecasts the tax revenue raised from increasing the rate of ADS will be £2.3 million in 2018/19 rising to £25.4 million in 2019/20.
LBTT, the Scottish version of Stamp duty is also a tiered system, but the rates and property pricing bands differ to the English and Welsh systems.
Properties costing under £40,000 are not subject to LBTT, but after that second home owners pay an extra 3 per cent over and above the standard rate. This will become 4 per cent under the new proposals.
The Scottish government confirmed that the 4 per cent surcharge will not apply if the contract for a transaction was entered into prior to the announcement on 12 December 2018.