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April 16th 2024

LBTT is changing – here’s what we know

Land and Buildings Transaction Tax (LBTT) plays a pivotal role in the Scottish real estate market, influencing both the broader economy and your individual financial decisions.

As significant changes to the LBTT legislation approach, understanding these shifts is going to be crucial for maintaining your compliance and managing your expenses.

In short, LBTT is a form of tax applied to property transactions in Scotland – akin to Stamp Duty Land Tax in England – charged on residential and commercial land transactions.

LBTT's role is partly revenue generation for the Scottish Government, but it also influences housing market dynamics and regional economic development within the country.

The upcoming legislative changes to LBTT are driven by the Government’s goals of both enhancing market efficiency and fairness.

The adjustments aim to better align tax with current housing and economic conditions, facilitating smoother transitions in property ownership and supporting local government initiatives.

But what are the consequences for you when it comes to buying property?

Key changes to LBTT

If you're considering buying or leasing property in Scotland soon, it's crucial to understand some significant changes to LBTT that could impact your decisions and financial planning.

One of the most notable adjustments is the extension of the Additional Dwelling Supplement (ADS) relief period.

Previously, you had 18 months to sell your previous main residence after purchasing a new one to qualify for ADS relief.

This timeline has now been extended to 36 months, offering greater flexibility to manage the selling process without rushing or facing additional financial burdens due to time constraints.

Also, with the new rules, if you inherit a property after the agreement to purchase another but before the completion of this purchase, the inherited property won’t count towards the total number of properties you own for ADS purposes.

This adjustment is essential because previously it could trigger additional tax liabilities, potentially complicating your transition to a new home.

Additionally, if you’re going through a divorce or legal separation, the new LBTT rules could also ease some of the complexities associated with property division.

Specifically, ADS will not apply if you need to retain a stake in a previous residence due to a court order or formal agreement following the separation.

This means you won't face extra tax charges under these already stressful circumstances, making it somewhat easier to manage property matters during a life transition.

These adjustments are designed to make property transactions smoother and less taxing financially and emotionally, especially if you’re navigating significant life changes.

Understanding these new provisions can help ensure that you make informed decisions when buying property in Scotland.

Please get in touch with our team if you require further information.

Call +44 (0) 1856 872983 or email enquiries@scholesca.co.uk


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