MSPs have now voted in favour of the Land and Buildings Transaction Tax (LBTT) (Amendment) (Scotland) Bill. This supplement was proposed by Deputy First Minister, John Swinney, who has announced it was introduced to protect first time buyers in Scotland from potential distortions to the property market in the wake of the Chancellor's announcement in November 2015 of a similar charge being introduced by the UK Government from April 1 2016.
In Scotland, LBTT replaced UK Stamp Duty in April 2015.
A supplement will now be levied on the purchase of additional homes such as second homes or buy-to-let properties. The legislation will bring the additional levy into force by 1 April 2016.
The extra charge announced will be an additional supplement of 3% of the purchase price of the property on top of any existing LBTT. The new tax will affect properties which cost over £40,000.
As an example, this will mean that a property being purchased for £160,000 as a second home will incur LBTT of £300 with an additional supplementary levy of £4,800 being the 3% of the full purchase price.
However, even where no LBTT is payable which includes properties under £145,000, the additional tax will still be due. A property, if deemed a second property with a purchase price of £120,000, would attract a supplement of £3,600 despite there being no LBTT due.
The Government have confirmed that the remaining LBTT rates will remain the same next year.
This means that parties wishing to purchase an additional property or a buy-to-let property will need to take these figures into account when organising their funding as this levy will have financial implications on a large number of purchases.