Do you pay LBTT on the full price when buying a new-build with a part exchange?

Introduction

People often ask whether part exchanging an existing home against a new-build reduces the amount of Land and Buildings Transaction Tax (LBTT) they pay. The short answer is usually no. In most cases, LBTT is still calculated by reference to the full chargeable consideration for the new property being bought, not the net amount paid after the builder takes the old home in part exchange.

This can be confusing because a part-exchange deal feels like one overall arrangement. For LBTT purposes, however, it is usually analysed as separate land transactions. That distinction matters when working out both the main LBTT charge and whether the Additional Dwelling Supplement (ADS) applies.

The Question

A homeowner wants to buy a new-build dwelling for about £300,000 and part exchange their current home, worth about £130,000, with the builder. They want to know whether the part exchange reduces the LBTT, or whether LBTT is still charged on the full £300,000 purchase price.

Nick’s Explanation

Nick’s explanation was that, in a part-exchange arrangement of this kind, the buyer’s purchase of the new-build and the builder’s acquisition of the old home are treated separately for LBTT purposes.

In summary:

• LBTT on the new-build is calculated on the chargeable consideration for that purchase.
• The builder’s allowance for the old home does not usually reduce the LBTT due on the buyer’s acquisition.
• The builder’s acquisition of the old property is a separate transaction and any relief on that side of the arrangement is generally for the builder, not the buyer.
• If the buyer is replacing their only or main residence and the timing conditions are met, ADS should not apply.

Using the figures in the scenario, Nick’s conclusion was that LBTT would be calculated on £300,000, producing tax of £4,600 under the residential rates referred to in the original explanation.

The Law

LBTT is charged under the Land and Buildings Transaction Tax (Scotland) Act 2013. The tax is charged on a land transaction where a chargeable interest is acquired for chargeable consideration.

In broad terms, chargeable consideration includes money or money’s worth given for the acquisition. Where property is exchanged, special valuation rules can apply so that the tax is not simply based on the cash changing hands. The legislation and Revenue Scotland guidance treat exchanges and part exchanges by looking at the substance of what is being given for what is acquired.

Where a housebuilder takes a buyer’s existing home in part exchange, there are usually two transactions:

• the buyer acquires the new-build from the builder; and
• the builder acquires the buyer’s former home.

There is also a specific relief commonly referred to as part-exchange relief, but that relief generally applies to the builder’s acquisition of the old home where the statutory conditions are met. It does not normally reduce the buyer’s LBTT on the new home.

ADS is a separate supplement that can apply where a buyer owns more than one dwelling at the end of the effective date of the transaction. However, an exception is available where the new purchase replaces the buyer’s only or main residence and the statutory conditions are satisfied.

Analysis

The practical analysis is usually as follows.

1. The buyer is purchasing the new-build for about £300,000.

   For LBTT purposes, that acquisition is looked at on its own. The fact that the builder is also taking the buyer’s old home as part of the overall deal does not usually reduce the chargeable consideration for the new-build purchase.

2. The old home is being transferred to the builder for about £130,000.

   That is a separate land transaction. It may qualify for part-exchange relief on the builder’s side if the statutory conditions are met, but that does not alter the buyer’s LBTT computation on the new-build.

3. LBTT is therefore calculated on £300,000.

   Using the residential rates set out in Nick’s explanation:

   • £145,000 at 0% = £0
   • £105,000 at 2% = £2,100
   • £50,000 at 5% = £2,500

   Total LBTT: £4,600.

4. ADS must then be considered separately.

   If the buyer is replacing their only or main residence and the old home is disposed of as part of the same overall arrangement, ADS should not apply. If the buyer completes on the new-build while still owning the old home, ADS may be payable at first, although a repayment may be available if the former main residence is sold within the relevant time limit.

The key point is that part exchange affects how the transaction is funded, but it does not usually reduce the taxable value of the new property purchase for LBTT purposes.

Outcome

On the facts described, the buyer would usually pay LBTT on the full £300,000 price of the new-build, not on the net amount after deducting the value of the old home taken in part exchange.

The builder’s acquisition of the old home is treated separately. Any part-exchange relief on that transaction is generally the builder’s relief, not the buyer’s.

If the buyer is genuinely replacing their main residence and the timing works properly, ADS should not apply.

Practical Steps

If you are considering a new-build part exchange, it is sensible to check the following before completion:

• the agreed purchase price of the new-build;
• the agreed value being given for the old home;
• whether the transaction documents clearly show two separate land transactions;
• whether you will still own the old dwelling at the end of the day you complete on the new one;
• whether the new property is replacing your only or main residence for ADS purposes; and
• which LBTT rates apply at the effective date of the transaction.

You should also ask your conveyancer to confirm the LBTT treatment in writing, especially if there is any unusual feature such as incentives, gifted deposits, shared equity, deferred consideration, or a delay between acquiring the new home and disposing of the old one.

Conclusion

Buying a new-build with a part exchange does not usually reduce the LBTT on your purchase. In a typical arrangement, LBTT is charged on the full value of the new home you are acquiring, while the builder’s purchase of your old home is a separate transaction. The main extra issue to check is whether ADS applies, which will depend largely on whether you are replacing your only or main residence and on the completion timing.

Legal References Used

• Land and Buildings Transaction Tax (Scotland) Act 2013
• Revenue Scotland guidance on exchanges and part-exchange transactions
• Revenue Scotland guidance on Additional Dwelling Supplement

This page was last updated on 22 March 2026.

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