What are the upcoming changes to LBTT (stamp duty)?
Subject to Royal Assent, on the 1st of April 2016 there is a 3% LBTT (stamp duty) surcharge payable on additional property purchases (such as buy-to-let properties and second homes) of £40,000 or more. The additional supplement is 3% of the total purchase price. The Deputy First Minister of Scotland announced the change in legislation back in December which mirrors a similar move by the UK Government which will impact England and Wales.
The surcharge is payable if at the time the deal goes through you own other properties in the UK or even Worldwide, unless the property you are purchasing is going to be your principal residence or being purchased in substitution of your principal residence.
Are the changes to LBTT (stamp duty) having an impact on the property market?
The market is currently overheating as investors are panic buying before the 3% LBTT surcharge comes into effect on 1st April.
The market is sparse at the moment as the textbooks tell sellers to wait for Spring so there is not enough supply to meet demands. We are also witnessing the effects of ‘Blue Sky Sunday Syndrome’ as we approach Spring which results in more buyers attending Open Viewing on a Sunday and often many parties interested in the same property (note to sellers – this is why we strongly recommend you consider hosting Open Viewings on a Sunday!).
This creates an imbalance in the market because too many buyers are chasing too few properties. As a result closing dates are the norm and often ridiculous prices are paid for average properties – sellers should note that now is an excellent time to launch their property on the market!
This was a feature of the market before the recession of 2008. This year the situation has become compounded by panic buy investors who will be obliged to pay the 3% surcharge on LBTT (stamp duty) if they cannot do the deal and pay for the property before the 1st April.
Aren’t the changes to LBTT (stamp duty) good for First Time Buyers?
The change in legislation will in the long term be good for first time buyers but the unintentional consequence due to the change of legislation is pricing first time buyers out of the market until after the 1st April.
Where can I find out more information regarding the changes to LBTT (stamp duty)?
If you are looking for advice on the changes to LBTT (stamp duty) – speak to us first about advice with regards to your proposed sale and/or purchase. We will be able to guide you on the timings involved.
The Scottish Government have compiled a useful website with answers to FAQs regarding the new LBTT (stamp duty) surcharge. You can visit the site by clicking the link here: https://www.revenue.scot/land-buildings-transaction-tax/frequently-asked-questions.
You can also view Revenue Scotland’s legislative guidance online, published 16th March 2016, here: https://www.revenue.scot/land-buildings-transaction-tax/guidance/lbtt-additional-dwelling-supplement-guidance.