Exclusive:Government told to increase LBTT threshold for first-time buyers in Edinburgh

Currently first-time buyers are exempt from paying LBTT on the first £175,000 of their new property. However ESPC warns rising house prices mean this no longer reflects the reality of the property market.

It says the LBTT exemption threshold is acting as a barrier for first-time home owners in high-demand areas like Edinburgh.

In Edinburgh, East Lothian and Midlothian the average first-time buyer faces an LBTT bill of £1,671 - just £600 less than non-first-time buyers.

According to Registers of Scotland data, there has been a 262 per cent decrease in properties sold within the tax-free band 0 bracket across Edinburgh, the Lothians, Fife and the Scottish Borders since LBTT was introduced in 2015. In Edinburgh alone, just 5 per cent of properties sold in 2024 qualified for Band 0, down 32 per cent from 2015.

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Paul Hilton, chief executive of ESPC, is now calling for a zonal pricing model to be introduced to account for regional disparities in house prices.

He says the threshold in Edinburgh should be increased from £175,000 to £250,000, with other increases being introduced in East Lothian and Midlothian.

The Office for National Statistics calculated that the average house price for first-time buyers in the city was £248,000 as of September 2025. This is an increase of 4 per cent in a year.

Mr Hilton said: “The current LBTT threshold is simply not aligned with the market.

“First-time buyers are already stretched to cover deposits and legal costs. This additional tax burden is now making home ownership even more inaccessible.

“Introducing a zonal pricing model based on regional disparities of property prices is a practical, evidence-based proposal that reflects the diversity of Scotland’s housing market.

“A one-size-fits-all approach is no longer fit for purpose.”

He added: “With Scotland in the midst of a national housing emergency, the need for targeted policy intervention has never been more urgent.

“We speak on behalf of all our members in urging policymakers to modernise the LBTT system as a matter of priority, starting with immediate revisions to the first-time buyer threshold.”

Last year’s Scottish budget increased LBTT on second and rental homes and the Scottish Fiscal Commission warned “increases to LBTT are not consistent with any economically sensible strategy”.

Finance Secretary Shona Robison is due to set out the 2026/27 Scottish budget on January 13.

A spokeswoman for the Scottish Government said: “Decisions on tax will be made as part of the Scottish budget on 13 January.

“Scotland’s tax policies are responsible, grounded in evidence, and work carefully to balance the need to raise revenue with the impacts on taxpayers and the economy.

“As announced in the 2025/26 Scottish budget, a review is underway to consider various aspects of the residential and non-residential arrangements for LBTT. The review is intended to help support decisions in the next Scottish Parliament.”