Blog: LBTT has worked – but a Brexit break might be due

By Rodney Whyte, partner and property and planning specialist at legal firm Pinsent Masons

As a specialist in land acquisition and housebuilding, it was encouraging to note that revenue from the Land and Building Transaction Tax (LBTT) in the last full financial year rose by 12.8% to £546 million, up around £40m on budget and assisted by a buoyant Edinburgh market, confounding some predictions that the Scottish Government would “come a cropper’” due to their approach to the former Stamp Duty Land Tax.

Blog: LBTT has worked – but a Brexit break might be due

Rodney Whyte

However, as we edge daily towards the prospect of a Brexit-no-deal scenario, serious questions arise as to whether this level of tax revenue is sustainable, and it may be prudent for Holyrood Ministers to now consider options to maintain and stimulate transactional activity so as to ensure that LBTT revenues continue to make a substantial contribution to Scotland’s finances.



Market soundings indicate that house purchasers, unsure if the crucial Brexit tie will be decided in extra time, are putting their “foot on the ball” with regards to making a reservation or commitment to purchase a new home. There is no sense of crisis, but the rate of reservations of new-build homes is beginning to shade a little and the most logical explanation for this appears to be Brexit.

If the housing market does catch a cold, and hopefully it will be a mild sniff as opposed to a full-blown flu, what might the Scottish Government to do to embolden home buyers, encourage continuing investment in much needed housebuilding programmes, and maintain LBTT revenues?

In this analysis we have to acknowledge that LBTT rates at the higher end of the Scottish market are at odds with the English top-end market and some observers would consider them penal and uncompetitive on a cross-border basis.

For example, buying a property in Scotland in the £325,000-£750,000 price bracket will attract LBTT of 10% and any property over £750,000 a hefty 12% of value. In England, the Stamp Duty equivalent on a property valued between £250,000 and £925,000 is only five%, doubling to 10% for purchases between £925,000 and £1.5m, and capped at 12% on any home valued at more than £1.5m.



Certainly, the higher tax rates in Scotland are not helpful in encouraging people to buy in Scotland and there is little doubt they act as a disincentive to inward investment. Now may be the time for the Scottish Government to soften their stance regarding the higher rate bands and to offer a Brexit-related LBTT holiday covering the period leading up to and post-Brexit. A relaxation on LBTT and a re-adjustment of rate bands would create a stimulus, particularly at the upper end of the market which generates a disproportionate slice of LBTT revenue, and which is typically composed of discretionary buyers who don’t need to buy and who have other options such as upgrading or extending their existing accommodation. It would also create a degree of equal comparison with the English market and at least we would not be at a disadvantage compared to our southern neighbours.

I wouldn’t necessarily argue that a decision to amend the rates should at this stage be permanent, but could simply be for a defined period which encourages continued transactional activity during a time of significant uncertainty. If revenue numbers were not adversely affected by such a “holiday”, Government might choose to elongate the policy and level the playing field with England.

Only last month Bank of England governor, Mark Carney, predicted a disorderly exit from the EU could have a crushing effect on house prices, which he forecast could fall as much as 35% over a three year period.

Cautious house buyers may be tempted to wait to see if this comes to pass and cash in at the bottom of the market. Such a hiatus would be disastrous on many fronts. A defined LBTT relaxation period would send a strong message that now is a good time to buy and would help sustain transaction levels and tax revenues in the uncertain months ahead.



The Scottish Government have been innovative in helping aspiring home owners take their first steps on to the property ladder. Now is the time to continue to be bold, to continue to innovate and demonstrate forward thinking, so that transaction levels, and as such LBTT receipts at the higher end of the housing market, are maintained despite the gathering clouds of Brexit.


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