What is Land and Buildings Transaction Tax?
LBTT is a form of taxation governed by the Land and Buildings Transaction Tax (Scotland) Act 2013. It applies to commercial and residential land and buildings, both freehold and leasehold, which are purchased or transferred in exchange for payment. If this tax applies to a purchase you make, you must submit an LBTT return to Revenue Scotland or you could face penalties. An LBTT return must usually still be submitted even if no tax payment is due.
What are the standard LBTT residential property rates in Scotland?
The standard LBTT rates apply to most purchases of residential properties in Scotland. However, these rates are usually amended (more details are provided below) if the buyer is purchasing their first home or if they’re purchasing an additional property (ie when they own multiple residential properties at the same time).
As of 6 April 2023, the base LBTT threshold is £145,000 for residential properties. This means that property that’s purchased for less than this price (or which is worth less than this amount if it is being transferred in exchange for payment) is not liable for LBTT. As of 6 April 2023, the LBTT is charged at rates of:
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for any portion of the price/value up to £145,000 = 0% (the ‘nil rate’ band)
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any portion of the price/value from £145,001 to £250,000 = 2%
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any portion of the price/value from £250,001 to £325,000 = 5%
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any portion of the price/value from £325,001 to £750,000 = 10%
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any portion of the price/value above £750,000 = 12%
Example: Frank buys a house for £280,000. He pays no LBTT on the first £145,000. He pays 2% of the next £105,000 = £2,100. He pays 5% on the remaining £30,000 = £1,500. So in total Frank must pay £2,100 + £1,500 = £3,600.
Do I have to pay additional LBTT if I already own another residential property?
A higher rate of LBTT is normally payable in respect of purchases of additional residential properties costing over £40,000. This is called the Additional Dwelling Supplement (ADS). The ADS applies when a buyer is purchasing a residential property in Scotland when they already own a residential property (in Scotland or elsewhere). If there are multiple buyers, the ADS will apply if one buyer fits this criterion. The ADS will often apply to holiday homes and rental properties. As of 1 April 2024, the ADS will only apply to individuals’ whose share in an eligible property is at least £40,000. Exemptions can also apply for inherited property and property obtained during divorce or separation situations.
As of 6 April 2023, the ADS rate is 6% of a property’s purchase price. This will be charged in addition to regular LBTT rates.
If you sell your other residential property which was your main residence within 36 months of purchasing your new property (before 1 April 2024 this was 18 months), which has become your main residence, you may be eligible for a repayment of the ADS rate you paid. For example, if you buy a new main residence before selling your previous one, but you later sell the old one.
See the Revenue Scotland guidance for up-to-date LBTT rates, information on exemptions and exceptions, and to access the LBTT calculators.
How much LBTT will I pay if I am buying my first home?
In Scotland, you can claim First-Time buyers relief on LBTT if you are buying your first home. If you’re eligible for the relief, the base LBTT threshold (ie for the nil-rate band) will be increased to £175,000.
This means that you don’t need to pay LBTT if the property is purchased for this amount or less. If the property is purchased for more than £175,000, you will pay the regular 2% rate on the proportion of the price between £175,001 and £250,000 and so on (in accordance with the standard LBTT rates).
Are there exemptions to LBTT requirements?
LBTT will usually not need to be paid and LBTT returns will generally not need to be made in certain situations. These include when:
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property is transferred due to divorce or dissolution of a civil partnership
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property is left in a Will
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no money or payment changes hands (ie if the property is a gift)
There are exceptions to these exemptions. For more information on LBTT exemptions and reliefs, read the Revenue Scotland guidance. You can Ask a lawyer for help working out how LBTT applies to you.
For more information on LBTT and ADS in relation to gifts and bequests, read the Revenue Scotland guidance on inherited dwellings and on exemptions and reliefs from the ADS.
What other taxes need to be paid when property is sold?
Some other taxes may need to be paid when a property is sold. For example:
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Capital Gains Tax (CGT) - this tax is charged on profits made when somebody sells an asset that has increased in value. It may be applicable if, for example, you sell a second home. For more information, read Capital gains tax
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Annual Tax on Enveloped Dwellings (ATED) - often, if a company sells residential property in the UK that’s worth more than £500,000, they must pay ATED and complete an ATED return. For more information, read the government’s guidance on ATED
