Be Smart in March to Avoid Being an April Fool

Flowers and lambs won’t be the only thing springing up with new rules meaning that certain property tax bills could be taking a leap also.

If buying a commercial property or purchasing a house is on the horizon you may want to push it through before April 1, depending on the prices involved.

This is due to the recent announcement of the new rates for the replacement to Stamp Duty Land Tax in Scotland, Land Buildings and Transactions Tax (LBTT). It’s good news for residential buyers of properties under £145,000, who won’t incur any tax. However, if you are going to pay more than £333,000 for a residential property it would be more cost effective to push the sale through before April 1 in order to benefit from the lower SDLT rates.

The new LBTT rates for commercial property purchases are:

  • 3% for the part of the price between £150,001 and £350,000; and
  • 5% for any excess over £350,000

The new rates for residential purchases are:

  • £145,001 – £250,000 you pay 2% on this part of the price
  • £250,001 – £325,000 you pay 5% on this part of the price
  • £325,001 – £750,000 you pay 10% on this part of the price
  • £750,001 and over – 12% on this part of the price

This is a jump for commercial properties that fall under the price bracket £150,001 to £249,000 (SDLT had applied 1%), and more properties will fall under the 4.5% bracket, which has been brought down to £350,000.

Commercial leases will pay the same as under SDLT, but tenants will be required to submit LBTT returns every three years, and residential leases will not incur any LBTT.

So it may well pay to spring into action now – or be left bleating when April arrives.

Caroline Maher is an experienced lawyer in commercial property helping business owners, landlord and tenants throughout Fife, Edinburgh and Scotland.