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LBTT surcharge to be introduced

In setting out the Scottish Government’s tax proposals in the 2016-17 Draft Budget, the Deputy First Minister announced that legislation would be introduced before the Scottish Parliament proposing a new LBTT supplement on purchases of additional residential properties in Scotland (such as buy-to-let properties and second homes) over £40,000.

Subject to approval by the Scottish Parliament, the LBTT supplement will come into effect from 1 April 2016 and apply to the total purchase price of an additional residential property purchase above £40,000 (the point at which a buyer is required to make an LBTT return). An additional home purchased for £35,000 would therefore attract no LBTT, but an additional home purchased for £40,000 or more would pay 3% on the total purchase price.

The LBTT supplement will be chargeable if, at the settlement of a transaction involving the purchase of a dwelling in Scotland, the buyer owns more than one dwelling (whether in Scotland or another country). If the buyer does, and unless the additional dwelling purchased is a replacement of the buyer’s existing main residence, then the supplement will apply to the property just purchased. For example, if individual A owns a dwelling in which they live (their main residence) and then buys a new buy to let property, then the supplement will apply. If individual B owns both their main residence and a buy to let property then sells their main residence and purchases a new main residence, the supplement will not apply to the purchase of the new residence even though after settlement of the transaction the buyer owns two residential properties.

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