New Taxes Cause a Mini Housing Boom, How does LBTT or ADS Affect You?

They wanted to deter buy to lets, it kind of worked, caused a mini housing boom, and they missed the mark! 

Buy To Let Mini Housing Boom

Buy to let Mini Housing Boom

The April 1st deadline saw the introduction of new rates of UK stamp duty and a new Scottish tax the Additional Dwelling Supplement. The race to beat the date caused a surge in the purchase of buy to lets. Landlords across the country signed up on 45,000 loans in March,  up a whopping 142% compared to the previous year.

While most of this was in the south-east, March sales in Scotland saw a healthy rise  21% over the previous year. Most of this was at the bottom of the market, flats and terrace houses. For the Scottish property sector, this has been a mini housing boom with sales reaching their highest point for eight years.

 

A Tax to Cool the Buy to Let Market

Now Has Unforeseen Consequences.

 

Last year Scotland saw the introduction of Land and Buildings transaction tax ( LBTT). It has been widely criticised for generating less than expected returns for the Scottish Treasury.  This April saw the introduction of the ADS (Additional Dwellings Supplement), an additional 3% of “Stamp Duty” for what we all thought were buy to let landlords, Oh boy, was this wide of the mark.

It was this new tax on Scottish property that caused the first quarter mini housing boom. However, it is not just landlords that are getting caught. You become liable for ADS when or if:-

You cannot sell your old house before you buy the new one. You pay ADS.

You let out your old house and buy a new residence to live in. You pay ADS.

If you own a Uk or off- shore residential property, then choose to buy a second home in Scotland. You pay ADS.

Remember this is an addition 3% on top of the LBTT

Protecting the Scottish Housing MarketMini Housing Boon

They were trying to protect the Scottish housing market from a rash of southern investment. Following the introduction of an additional  3% Stamp Duty in England to catch “buy to lets”, they had to do the same in Scotland otherwise, there would have been a rush of people from South of the Border coming to Scotland to buy properties to let out.

Sadly like a lot of hasty tax legislation the ADS rules as presently set out seem to hit more people that you would expect and will have a significant impact on those thinking of moving house.

I have no clever tricks or suggestion for you; that’s just the way it is, and we are all going to have to get used to it. But I imagine there will be many who will get caught out and face an unexpected bill. Most People would not have imagined that a tax brought in to deter buy to lets would have an impact on them?

Ce La Vie!

The Revenue Scotland website has many examples, and I have chosen just a handful for today’s Sound Bite. Have a look at the others and try not to have too many sleepless nights if you are about to move house.

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As ever, any thoughts or questions around today’s subject or your tax planning, please call or email.

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Slaying your tax dragons and making life less taxing!

Alan Long
The Long Partnership

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