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ACQUISITION COSTS
Acquisition costs are incurred at the point you purchase a property, in addition to the purchase price.
Land and Buildings Transaction Tax (LBTT) In Scotland, the Land and Buildings Transaction Tax (LBTT) is similar to stamp duty in England & Wales. It is levied at different rates depending on the value of the land or property and its use.
A 4% surcharge, on top of the normal LBTT rate, will be charged for the purchase of additional residential properties, such as buy-to-let properties and second homes.
Those exempt include those persons purchasing their first property or home owners moving from one main residence to another. This 4% levy applies to relevant purchases that exchanged after 25 November 2015 and complete on or after 1 April 2016.
The table below outlines how the current LBTT regime impacts investors in Scottish residential property:
Legal Fees Legal fees cover the cost of hiring a solicitor to conduct the conveyancing on the purchase of your property. Each solicitor sets their own rates so there is no standard industry fee. If you are financing the purchase of your property with a mortgage, you will also have to pay your lender s legal fees.
Mortgage Costs The mortgage costs include the arrangement fee charged by your lender and the cost of using a mortgage broker to source the best deal for you.
Valuation Fee If you are financing the purchase of your property with a mortgage, your lender will require a bank valuation to be undertaken. The fee for this is dependent on the size of the property, however it is likely to be between £250 and £1,000 (plus VAT).
Home Report Home Reports were introduced in Scotland in 2008. Three documents must be provided upon the sale of a property:
1) Single Survey & Valuation Put together by a chartered surveyor following a visual inspection gives an indication of the condition of the property and potential repairs required. Furthermore it provides a general valuation figure
2) Property Questionnaire This questionnaire has approx. 16 sections that provide more information about the home including but not limited to the council tax band, issues faced in the past (such as fire, storm damage, asbestos), notices that affect the home.
3) Energy Report The energy report summarises the energy efficiency of the property in the form of an Energy Performance Certificate.
Furniture Pack In order to maximise rental desirability it is recommended that you furnish your apartment. The cost of furnishing depends on the size of the apartment and the quality of the furniture, but can be estimated between £5,500 and £6,000 (plus VAT) for a one-bed apartment and over £7,500 (plus VAT) for a two-bed apartment. If you are targeting your apartment at the corporate lettings market, the cost of furnishing may be higher.
ACQUISITION COSTS
Purchase price
Rate on band for
single property
(progressive rate only)
Rate on band for buy-to-let
or second property investors
(including additional 4% levy)
Up to £145,000 0% 4%
£145,001 - £250,000 2% 6%
£250,001 - £325,001 5% 9%
£325,001 - £750,000 10% 14%
Above £750,000 12% 16%
If you purchase the property directly into a company and it is not caught under the ATED legislation (see page 7) then the same rates of tax will apply. We recommend that you speak with a tax advisor or lawyer to understand more about exemptions. England and Wales have their own bands and rates for purchase of land and property.