A NEW CHAPTER
The 2022/23 financial year saw LBTT revenue reach record levels, driven by rising prices and a relatively strong sales market. As house prices have risen, almost two-thirds of sellers will now be subject to LBTT.
While recent LBTT receipts have benefitted from an active sales market, the impact of the cost-of-living crisis, including rising mortgage costs, means that Revenue Scotland is forecasting LBTT to contract by 16% in 2023/24 as the market is expected to cool off.
Revenue from the Additional Dwelling Supplement (ADS), which is a tax on second homes and empty homes, is forecast to increase in 2023/24 by 6%. However, given the recent increase in the ADS rate and the recently announced potential for councils to increase Council Tax rates on second homes , this Revenue Scotland forecast does seem ‘rosy’.
LBTT & NEW BUILDS
New build properties are an important source of LBTT revenue. Despite accounting for only 14% of transactions in Scotland in 2022/23, new build property sales generated an estimated 24% of LBTT revenue.
In total, the housebuilding sector generates over £100 million in LBTT receipts per annum for the government. And with many homebuilders currently offering incentives involving the payment of LBTT, a significant proportion of this revenue is effectively being funded directly by the sector itself.
Edinburgh generated an estimated £128 million of LBTT revenue (27% of the national total) in 2022/23. The average LBTT bill in Edinburgh was £11,720, compared to £3,288 in Glasgow and £3,062 in Aberdeen.