THOUSANDS of first-time buyers will be handed a tax break from the end of next month, it has been confirmed.

Scottish ministers announced the move last year, which will see a third of new buyers pay hundreds of pounds less in tax.

But critics have raised concerns the scheme will simply lead to a hike in property prices as the market plugs the gap.

Finance Secretary Derek Mackay said legislation had now been introduced to exempt first-time buyers from Land and Buildings Transaction Tax (LBTT).

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He added: “This is the start of the wider parliamentary process to introduce changes that will help an estimated 12,000 people annually to purchase their first home.”

The move – which will apply to transactions which occur after June 30 – will introduce a tax relief for first-time buyers on the first £175,000 of a property’s purchase price. This will leave around 80 per cent of new buyers exempt from LBTT.

Of the 12,000 buyers expected to benefit, 7000 will pay £600 less in tax and a further 5000 will save an average of £290, according to analysis by the Scottish Fiscal Commission (SFC).

UK Chancellor Philip Hammond announced a similar tax break on properties of up to £300,000 last year. The Scottish Government’s proposals mirror this and adjust it for the market north of the border.

Researchers at the SFC estimated the shake-up will drive an extra 150 to 200 property sales a year, but said this “only displaces other transactions” as it does not affect the supply of new properties.

Meanwhile, industry figures have warned the scheme will do little to stimulate the wider market.

Hew Edgar, policy manager at the Royal Institution of Chartered Surveyors in Scotland, said more needed to be done to boost the supply of homes.

He said: “There is no doubt that raising the threshold of LBTT for first time buyers to £175,000 will help a number of new buyers, but this is not the most effective approach to stimulating the house buying market.

“Assisting more new entrants to the house buying market will simply add pressure on Scotland’s already stretched supply of homes for sale.

“There are already numerous initiatives and structures designed to assist first-time buyers taking that first step onto the housing ladder, as well as those operating at the lower end of the housing market, but there is little stimulus for increasing greater supply of homes to buy.

“Without a reviewed policy to counter this this imbalance, the already-heated Scottish market will simply witness more pressure that will, ultimately, only serve to increase house prices, and stretch affordability.”

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In a consultation response last month, the Institute of Chartered Accountants of Scotland also questioned the need for the relief.

It added: “For those buying property with a mortgage it simply means that ‘the cake is cut in a different shape’ as typically there is a limit to the funds available.

“This measure may well simply increase the price of a first-time purchase by up to £600.”

It also claimed it was “inequitable” to deny the tax break to couples where one is not a first-time buyer, as ministers currently propose.

The Chartered Institute of Taxation claimed the tax savings were “tiny” in comparison with property costs.

It added: "There is a risk that reducing LBTT will simply lead to increases in property prices, meaning that the LBTT reduction is offset or partially offset by an increase in the cost of the property purchased.

"Another possible risk is that the relief will actually result in slowing the market down, as it may encourage first-time buyers to save for a larger property – so that they effectively skip the first rung on the property ladder."

But the SNP said its wider LBTT reforms – which include a clamp down on tax avoidance and giving those who have overpaid the chance to claim a repayment – meant it continued to “lead the way on making taxation fairer”.

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Critics have previously called for LBTT to be overhauled amid claims the tax framework – which replaced stamp duty in 2015 – has damaged the property market.

Scottish Labour’s finance spokesman James Kelly MSP welcomed the tax break but said more needed to be done to solve the housing crisis.

He said: “While relief from LBBT is welcome for first-time buyers, a comprehensive strategy is required to tackle the housing crisis.

“Too many people are locked in high rent private properties which is freezing them out of being able to purchase a house or flat for the first time.”