Low Value Homes Purchases will Incur No Tax Next April in Scotland
First time home buyers will be saving money next year in Scotland, but the expectation of a strong demand for starter homes is being downplayed. Finance Secretary John Swinney outlined new property tax rates that will lower the cost of buying a lower value property. The new Land and Building Transaction Tax (LBTT) outlined on Thursday offers buyers of properties up to £135,000 to avoid a stamp duty.
If the property is above £135,000 but below £250,000 the buyer will pay a 2% tax. There will be a 10% tax on property costing above £250,000 and a new rate of 12% will be charged for any property purchased at £1 million or above.
The new LBTT will offer relief to those buying lower value properties by either allowing them to pay no tax at all or reduced amounts compared to the previous tax schedule. It is hoped that first time buyers will see this as an advantage and return to the housing market in Scotland but some experts believe that the savings is too small and will be overlooked by those seeking a financial savings opportunity.
The new tax rates will go into effect in April 2015 which could be near the time when the lowest interest rates will be disappearing for good. Combined with lender’s potential to make borrowing more expensive in the future and the ability to save money on the property tax, perhaps first time buyers will see this as an opportunity too good to pass up. The final option to bring buyers back is to make the pricing on property fair and appealing. The sellers that do that will have the best luck in drawing in aggressive home buyers.