The Scottish Government has set in place an additional home supplement on top of the already standing Land and Buildings Transaction Tax (LBTT) for buy-to-let properties and second homes which will take place in April.
For property investors or landlords, this is a big deal and one that you should keep an eye on.
Have you been playing around with the idea of buying your first buy-to-let property? Property is one of the safest investments there is so it’s a great idea. So why wait and end up paying more? Do it now and save money on the purchase!
You have until April before the tax increases.
The stamp duty tax or LBTT in Scotland is the amount of tax that you pay when buying a property. The rate varies according to the price and the type of property.
Scotland’s Deputy First Minister John Swinney introduced the surcharge of 3% added homes supplement for property buyers investing in buy-to-let properties or anyone buying a second home worth more than £40,000.
The two main objectives of the added new tax is to help the Scottish Government raise more funds and to ensure that first-time property buyers obtain the best possible chance of entering the property market.
So how will the additional home supplement tax affect buy-to-let investments in real terms? We’ve set it out for you below to see how much it would cost, depending on the property price:
Properties up to £145k are currently at 0% LBTT tax this means that in April you will have to pay a tax of 3%.
Properties priced between £145k and £250k are currently sat at 2% LBTT tax, so in April you will have two taxes to pay. The 2% LBTT tax as well as the new addition of 3% home supplement.
The same is for properties priced at £250k up to £325k. These are currently at 5% LBTT tax with the addition of 3% home supplement.
Properties costing between £325k and £750k are currently at 10% LBTT tax and will have the additional 3% home supplement tax too.
To put this in context for you, a property costing £250k will currently cost £2,100 in tax but that will jump to £9,600 when the increase takes place in April.
The additional tax does not apply to properties costing £40k or less or purchases of caravans, mobile homes, houseboats, corporate entities or funds making significant investments in residential properties.
Now is the perfect time to invest in property. Perhaps you have a property to sell.
Now is a great time because of all the motivated buy-to-let investors who want to buy before the tax increases.
There will be an expected £30 million extra property purchases before April due to the increases, which highlights how tempting this investment is.