Buying a House > Stamp Duty Scotland and Wales

Buying a property is an expensive business. While you may think that you only need to shell out on your mortgage and your deposit, there’s a lot more to it.

When we hear about mortgages, our eyes water tend to water from the astronomical figures we’re quoted. But what about the other charges? Well, you’ve also got surveyor fees, legal fees and transfer fees to consider before you’ve even moved in your new home.

The costs don’t stop there, either.  Once your purchase has been cleared, you’ve then got removal costs to contend with as well as service charges, ground rent and upkeep to think about (if applicable). 

Then, on top of all that money and all that stress, you’ve got stamp duty.


What is Stamp Duty?

If you’re purchasing a property in England or Northern Ireland for more than £125,000, you will have to pay Stamp Duty. Stamp Duty, or Stamp Duty Land Tax (SDLT) as it is officially known, applies to both freehold and leasehold properties purchased both outright and with a mortgage.

While the tax is known as Stamp Duty in England and Northern Ireland, it has two different names in Wales and Scotland, with the respective systems also being slightly different to that used in England and Northern Ireland.

Let’s start in Wales.


How does Stamp Duty work in Wales?

Known for its rolling fields, the large population of sheep and historic national pride, Wales does things differently to England when it comes to Stamp Duty and how it works.

SDLT in Wales is known as Land Transaction Tax (LTT). The Welsh Government announced the new system in October 2017, with it coming into force in April 2018.

Like SDLT, Land Taxation Tax is payable when you buy or lease a property over a certain value. The system is much like the existing SDLT system that exists in England and Northern Ireland but was designed to be fairer and fund the public services in Wales, rather than the UK as a whole.


Differences between English and Welsh Stamp Duty

LTT rates differ from SDLT, with there being a higher threshold before you are required to pay the tax.

SDLT is charged on properties over £125,000, while LTT is charged on properties over £180,000. However, while SDLT may come into effect at a lower price, it does offer a discount (relief) to first-time buyers so that they do not pay any tax up to £300,000 and only pay 5% on the portion from £300,001 to £500,000.

LTT offers no relief to first time buyers, with the Welsh government claiming that the higher zero tax threshold of £180,000 is enough to capture most first-time purchases. The average price of a property in Wales is £160,232, so the figure appears to be accurate. The LTT rates in Wales are as follows:

less than £180,000 –  0%

£180,000 to £250,000 – 3.5%

£250,000 to £400,000 – 5%

£400,000 to £750,000 – 7.5%

£750,000 to £1.5m – 10%

rest over £1.5m – 12%


Rates for Buy to Let Properties in Wales

LTT rates increase when it comes to purchasing a buy to let property or a second home in Wales. A 3% surcharge applies to transactions involving the purchase of additional or buy-to-let properties. The charge is in line with the rest of the UK and applies when the full purchase price is above the initial threshold of £40,000. The LTT rates for second homes and buy-to-let properties in Wales are as follows:

less than £180,000 – 3%

£180,000 to £250,000 – 6.5%

£250,000 to £400,000 – 8%

£400,000 to £750,000 – 10.5%

£750,000 to £1.5m – 13%

rest over £1.5m – 15%

If you are in the process of selling your main residence when you buy your second property, you can claim a refund of the LTT surcharge if your old home is sold within 36 months of purchasing your new one. Refunds are requested through the Welsh Revenue Authority and are submitted through an LTT amendment and refund form.

If you’re purchasing a property with someone else, it’s worth noting that a surcharge will still be applied if one of you owns another property but the other doesn’t. Joint purchasers include Spouses, civil partners, cohabitants and children of these groups.

How does Stamp Duty work in Scotland?

Heading north from Wales and into Scotland, there’s another variation of Stamp Duty to get your head around. In Scotland, rather than paying SDLT like they do in England and Northern Ireland, property purchasers pay Land and Buildings Transaction Tax (LBTT). LBTT replaced SDLT on 1 April 2015 and the system is slightly different from its predecessor.

While SDLT is applied to the overall price of the property, LBTT is applied only to the part of the price over the relevant threshold and up to the next threshold. So, if you purchased your property for £195,000, you would only pay LBTT rate of 2% on the £50,000 over the £145,000 threshold.

According to the Scottish government, the structure of LBTT is designed so that the charge is more proportionate to the actual price of the property.

The current Land and Buildings Transaction Tax rates in Scotland can be seen below:  

less than £145,000 – 0%

£145,000 to £250,000 – 2%

£250,000 to £325,000 – 5%

£325,000 to £750,000 – 10%

rest over £750,000 – 12%


Rates for Second Homes and Buy-to-Let Properties in Scotland

An ‘Additional Dwelling Supplement’ was introduced by the Scottish Government in 2016. This supplement applies to all transactions that involve purchasing an additional property, which includes buy-to-let investments and second homes. The Scottish government introduced the supplement to ensure that opportunities for first-time buyers entering the market in Scotland were as strong as they possibly could be.

The supplement was introduced after the UK government introduced something similar in 2016. The Scottish government worried that the absence of a similar scheme in Scotland could lead to investors purchasing additional properties in Scotland and therefore making it difficult for first-time buyers to get on the ladder. The LBTT rates for second homes and buy-to-let properties in Scotland can be seen below:

less than £145,000 – 4%

£145,000 to £250,000 – 6%

£250,000 to £325,000 – 9%

£325,000 to £750,000 – 14%

rest over £750,000 – 16%

An additional property purchased for less than £40,000 will attract 0% tax. However, properties that are purchased in £40,000 to £145,000 range will be charged 4% on the full purchase price.


First-Time Buyer Relief in Scotland 

Unlike Wales, Scotland offers first-time buyers LBTT relief.

The Scottish Government introduced LBTT first time buyers relief in June 2018, and the threshold can be viewed below:

 less than £175,000 – 0%

£175,000 to £250,000 – 2%

£250,000 to £325,000 – 5%

£325,000 to £750,000 – 10%

rest over £750,000 -12%

LBTT first time buyer relief is available to all homebuyers who intend to occupy the property as their main place of residence. Because of this, the relief is only available for residential property purchases.

First-time purchases that are over the £175,000 threshold will benefit from first-time buyers relief on the portion of the purchases that are below the £175,000 threshold.  For example, if your first-time purchase was £200,000, you would only be charged LBTT on the £25,000 over the £175,000 threshold.

The Scottish Government predicts that buy increasing the LBTT threshold for first-time buyers to £175,000, the majority of first-time buyer transactions will not be taxed. Given that the average house price in Scotland is £149,036, this figure seems to be fair.


How to qualify for First-Time Buyer Relief

If you are purchasing a property with someone else, both parties will need to meet the LBTT first time buyer relief criteria, meaning that neither of you has previously or currently owned or purchased property.

In order to qualify for first-time buyers LBTT relief, purchasers must be able to demonstrate that the property will be their main place of residence. While you do not have to move into the property immediately, the buyer must indicate a clear intention to do so in the future. This indication allows you to carry out any renovation of remedial works that need to be carried out once the purchase has been completed.

LBTT relief is only available when a property is going to be the buyer’s main place of residence. It is not available when a property is purchased for another purpose, such as a buy-to-let investment.

You must contact Revenue Scotland, the tax authority for collection and management of Scotland’s devolved taxes, in order to claim your LBTT buyers relief. You can claim the relief as soon as you submit your LBTT return, or you can claim it as an amendment of that return at a later date.


How to Pay Stamp Duty 

Whether you’re in the UK, Wales, or Scotland, you must pay the tax to the relevant government within 30 days of the day after the completion of purchase.

If you have a solicitor, agent or conveyancer, they will usually offer file your return and pay the tax on your behalf if you ask them to and add the amount to the sum you pay them at the end of the process.

While paying the return can be done via online portals that have been designed to be as simple as possible, getting someone else to do it for you can save you an un-needed headache during the buying process.


So, there you have it, everything you need to know about ‘Stamp Duty’ in Scotland and Wales. Stamp Duty may seem like an annoying – and expensive – hidden cost, but it’s just part and parcel of buying a property. If you are in the market for a new property, you need to be aware of it how much you will owe and how you pay it.

The home process is a long and arduous road, with there being many hiccups that you have to contend with along the way. Stamp duty doesn’t need to be an obstacle. With the right planning and preparation, managing and handling your stamp duty return can be a relatively simple and painless process.

Whether you’re buying your second home or you’re a first-time buyer in Scotland or Wales, make sure that you understand the different systems and how they will impact your purchase. If you are ever unsure, seek the advice of a professional and never be afraid to ask questions for clarity.

Happy house hunting!