Scottish Property

The First Home Fund

Earlier this year, the Scottish Government announced a new funding scheme for first time buyers in Scotland for both new builds and existing properties. This was in addition to the existing shared equity schemes that are currently available. Although the Covid 19 restrictions inevitably impacted on the uptake of this scheme, some applications were able to proceed and when restrictions on house moves were lifted, the First Home Scheme quickly took off.

The First Home Fund is a £150,000,000 shared equity pilot scheme that is intended to provide first time buyers with up to £25,000 to help buy a property that meets their prescribed needs. The scheme is open to all first time buyers in Scotland and most of the main High Street Lenders offer mortgages as part of the First Home Fund Scheme. Local mortgage brokers/independent financial advisors can advise on the mortgage First Home Fund application process, and further details can be found on the Scottish Government’s website. Such has the success of this scheme been that it is now closed to applications for the current financial year but it appears that the Scottish Government will repeat the scheme next year. Your mortgage broker or financial advisor will be able to advise.

First time buyers can also benefit from the First Time Buyers Relief from Land and Buildings Transaction Tax (LBTT) and this also applies to non UK nationals as long as you are still acquiring your first home, and even if you might be letting out some of the bedrooms as part of the property.

Land and Buildings Transaction Tax

Land and Buildings Transaction Tax (LBTT) is the Scottish tax applied to residential and non-residential land and building transactions, including commercial leases. LBTT replaced Stamp Duty on 1st April 2015. This tax is payable at different rates, depending on whether you would qualify as a first time buyer, the price paid on a purchase transaction, or the duration and premium/rent paid on a lease transaction.

In April 2016, the Government introduced a new tax, known as Additional Dwelling Supplement (ADS) which is charged on the acquisition of second and subsequent properties, if you do not qualify for any of the statutory exemptions. ADS is currently charged at a rate of 4% of the purchase price of a new property.

The 2020/2021 Scottish Budget did announce one change to these taxes, mainly to amend the percentage of tax payable in relation to commercial leases. Otherwise, LBTT and ADS remain unchanged by the Scottish Budget.

In July this year, the Finance Secretary announced new measures in respect of LBTT to attempt to boost the economy in Scotland. The threshold at which LBTT is paid was raised from £145,000 to £250,000, meaning 80% of house buyers would be exempt from the charge. Please note this does not apply to ADS or non-residential LBTT rates. As an example, this will mean that purchasers purchasing a property costing more than £250,000 will save £2,100. At present, it is not known if this change to the threshold will be permanent or not.

Normally, a person who paid ADS when purchasing a property has a period of 18 months in which they can reclaim the ADS paid, should they dispose of their previous main residence during this time. New Legislation was introduced earlier this year which results in some buyers having a period of 36 months rather than 18 months to dispose of their previous main residence and still be eligible for a repayment of ADS. This new measure applies to those buyers who purchased a new main residence prior to 25th March 2020, with an effective date (settlement date) for the purchase of between 24th September 2018 and 24th March 2020. The intention behind this new Legislation was to give purchasers who were unable to sell their previous main residence within a period of 18 months due to the Coronavirus Pandemic, a fair opportunity to reclaim the ADS paid.

It is important to ensure that you seek detailed legal advice when purchasing a property/land, or entering into a commercial lease to ensure you are not paying more tax than you need to. Although LBTT and ADS are considered by Revenue Scotland to be “self-assessment” taxes, our experienced conveyancing team are on hand to assist with these property tax calculations and to discuss any exemptions you may benefit from, if required.

Contact our property team on 01397 701000 or [email protected]