Cabinet Secretary for Finance, John Swinney, presented his draft budget for 2016/17 to his fellow MSPs in the Scottish Parliament in December 2015 and unveiled his plans to introduce a 3% Land and Buildings Transaction Tax (LBTT) levy on the purchase of many second homes. Put simply, this means that buyers wishing to purchase a second home or a buy-to-let property will be faced with an extra charge on top of current LBTT rates.

According to the Scottish Fiscal Commission, the official watchdog of the Scottish government’s tax and spending plans, the supplement on LBTT will affect between 8,500 and 12,500 transactions each year, and could raise between £19m and £27m. There have been warnings about a surge in property purchasing before April in order for buyers to avoid the charge.

From April 2016, all properties for sale in Scotland that are purchased for over £40,000 will be liable to this levy in addition to the LBTT charged on the property in the usual way (LBTT replaced UK stamp duty in Scotland in April of 2015). The tax will apply to the whole property, and not just the proportion exceeding £40,000.

The new rules only apply to those buying additional homes, and not to those who already own multiple properties. Property developers, for example will not have to pay the charge if just swapping their main residence.

The LBTT only applies in Scotland so Scottish buyers are only expected to follow the regulations set in the country of purchase. However, the rates apply to global buyers. If someone from another country wishes to purchase a second Scottish property, the tax will apply.

The supplement won’t apply to those selling their property to fund their new one, but if the new property is purchased before the sale of their main residence then the supplement will have to be paid. This is completely refundable, however, as long as their previous property is sold within 18 months.

What constitutes a main residence?

where the owner and their family spends their time.

Where the owner’s children go to school.

Where property the owner is registered to vote.

Where the owner works.

The level of furnishing and degree of furnishing

The correspondence and registration address given to various organisations.

These changes are said to be made in order to allow Scotland’s first-time buyers to enter the market in a strong position and do not struggle to get on the property ladder.

This follows a similar announcement by the UK Chancellor George Osbourne in his autumn statement which imposed a 3% stamp duty surcharge on second and holiday homes in an effort to kick-start the property market for first-time buyers by deterring landlords from buying up properties.

There has been backlash however from landlords with John Blackwood chief executive of the Scottish Association of Landlords, explaining that “The supplementary tax on the purchase of second homes will have a huge impact on the buy-to-let market and exacerbate an already serious shortage of properties in many areas. We firmly believe that the biggest losers from today’s statement will be tenants who will now find it even harder to get the accommodation they want at a price they can afford.”