Nil Rate Band

Nil Rate Band

Under the 'The Land and Buildings Transaction Tax (Tax Rates and Tax Bands) (Scotland) Amendment (No.2) (Coronavirus) Order 2020' introduced by the Scottish Government on 15 July 2020, there will be a temporary increase in the nil rate band for LBTT residential property transactions from £145,000 to £250,000.

The change takes effect from Wednesday 15 July 2020 and will remain in place until 31 March 2021.

 Purchase price

LBTT rate

 Up to £250,000

0%

 Above £250,000 to £325,000

5%

 Above £325,000 to £750,000

10%

 Over £750,000

12%

The revised rates and bands will only apply to transactions with an effective date on or after 15 July 2020.

Residential transactions for consideration of £40,000 or more will still require to be notified to Revenue Scotland even if no tax is due.

Rates for the Additional Dwelling Supplement (ADS) and non-residential LBTT remain unchanged.

 

First-time Buyer Relief

Revenue Scotland guidance is for users not to select and apply First-time Buyer Relief on an LBTT transaction.

As the nil rate band threshold is now higher than the £175,000 limit for First-time Buyer Relief, claiming the relief will not reduce the amount of LBTT due any further. When using the LBTT calculator or completing an LBTT return in SETS, please either set the amount of First-time Buyer Relief to ‘£0’, or do not claim the relief.

In instances where agents believe the relief may have been applied in error, we encourage them to make an amendment.  Revenue Scotland will also be undertaking an analysis of returns made where the FTB relief has been applied, but the rate not manually changed to zero, and will contact taxpayers to advise them where an issue is identified.

FAQs - First-time buyer relief

Q1: My transaction has an effective date on or after 15 July 2020. Can I still claim first-time buyer relief?

A: Yes, however, Revenue Scotland guidance is for users not to select and apply First-time Buyer Relief on an LBTT transaction. The relief is still available, but as the nil rate band now applies to the first £250,000 of consideration, and this is more than the £175,000 limit that applies to First-time Buyer Relief, claiming the relief will not reduce the amount of tax due and payable.

Q2: I'm a first-time buyer, completing an LBTT return for a transaction with a chargeable consideration of more than £250,000 and an effective date of 15 July 2020 (or later); should I claim First-time Buyer Relief?

A: Revenue Scotland guidance is for users not to select and apply First-time Buyer Relief as claiming the relief will not reduce the amount of tax due on a transaction. If you still wish to do so, please be aware that SETS is currently applying an amount of First-time Buyer Relief when it is claimed for transactions above £250,000 and we are in discussions with our supplier with regards to a fix for this. If you choose to claim the relief, please see additional guidance on how to overwrite the value of the

Q3: I'm a first-time buyer and my transaction has an effective date of 15 July 2020 or later - why can’t I get a deduction of £600 against the tax due ?

A: First-time Buyer Relief increased the nil rate band threshold from £145,000 to £175,000 for qualifying first-time buyers and equated to a reduction in LBTT of up to £600. However, for transactions on or after 15 July 2020, the nil rate band has been increased to £250,000 for all residential transactions with an effective date of 15 July 2020 to 31 March 2021 (inclusive). As the nil rate band threshold is now higher than the £175,000 limit for first-time buyers, claiming First-time Buyer Relief will not reduce the amount of LBTT due any further. If eligible, you can still claim First-time Buyer Relief in your LBTT return, but the amount of the relief will be £nil. For guidance on how to do this, please see our

Q4: Why is SETS showing the wrong figure for First-time Buyer Relief and why can’t you stop it doing so ?

A: We are aware that following changes to the Nil Rate Band in July 2020, SETS is incorrectly applying an amount of First-time Buyer Relief when it is claimed for transactions above £250,000. We believe this issue will only affect a small number of transactions. In order to maintain access to SETS for the majority of users we will be making a change to update our system at a later date

Q5: I'm completing an LBTT return for a transaction with an effective date before 15 July 2020. Can I still claim First-time Buyer Relief?

A: Yes. You can claim First-time Buyer Relief on any qualifying transaction, but it will only have an impact on the total tax due for transactions with an effective date before 15 July 2020. For guidance on how to complete a return, please see our How to guide (link to guide).

Q6: Why is First-time Buyer Relief still showing as an option on returns even though it will not reduce the amount of tax due on transactions with an effective date on or after 15 July 2020?

A: First-time Buyer Relief is still available and hasn’t been removed under the 'The Land and Buildings Transaction Tax (Tax Rates and Tax Bands) (Scotland) Amendment (No.2) (Coronavirus) Order 2020' introduced by the Scottish Government on 15 July 2020. As it still exists in legislation, we have to provide an option for tax payers to select this relief if they wish to do so. However, selecting this relief will not reduce the amount of tax due on a transaction.

Q7: I’m looking to claim First-time Buyer Relief and the online tax calculator is showing a different amount of tax due compared to SETS. Which one is correct?

A: The tax calculator on our website will show the correct amount of tax due based on the figures and dates inputted. Revenue Scotland guidance is for users not to select and apply First-time Buyer Relief as claiming the relief will not reduce the amount of tax due on a transaction. SETS is currently applying an amount of First-time Buyer Relief for transactions above £250,000 and we are in discussions with our supplier with regards to a fix for this. If you choose to claim the relief, please see the additional guidance on how to overwrite the value of the relief as £nil (link to guide).

 

General information

Revenue Scotland guidance has been updated to reflect the change, as follows:

Calculating Tax

Information on tax rates and bands

Making an online LBTT return

 

FAQs - General

Q8: My transaction is about to complete, what should I do? Should I delay? Should I renegotiate the date of entry / effective date?

A: Speak to your adviser who will give you the advice you need for your transaction. Revenue Scotland cannot give advice about your circumstances.

Q9: Are changes to the residential LBTT rates and bands permanent??

A: No. This increase in the LBTT nil rate band is temporary. The change will run until 31 March 2021.

Q10: If I pay the tax now can I reclaim it later?

A: The application of the new rates and bands will be determined by the ‘effective date’ of your transaction. If the ‘effective date’ is before the date the legislation comes into force, the ‘old’ rates and bands will apply.
Legislation has been introduced with effect from Wednesday 15 July, 2020.
The revised rates and bands will only apply to transactions with an effective date on or after 15 July 2020.
Rates for the Additional Dwelling Supplement (ADS) and non-residential LBTT remain unchanged.

Q11: Will the changes apply to any transactions that took place before the date the legislation is introduced?

A: No – The revised rates and bands will only apply to transactions with an effective date on or after 15 July 2020.

Q12: If I don’t have to pay any tax as a result of these changes, do I still have to submit a tax return?

A: Yes. Residential transactions for consideration of £40,000 or more will still require to be notified to Revenue Scotland even if no tax is due. A penalty may be chargeable if the return is submitted late.

Q13: If this is the purchase of my second home do I pay no tax at all?

A: Additional Dwelling Supplement (ADS) will still be due on the purchase of second homes.
The changes in tax rates and bands will not apply to Additional Dwelling Supplement (ADS).
Rates for the Additional Dwelling Supplement (ADS) and non-residential LBTT remain unchanged.

 

Help and support

If you have any questions, please contact Revenue Scotland by email: lbtt@revenue.scot

 

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