Revenue Scotland LBTT: Understanding Land and Buildings Transaction Tax in Scotland: Rates, Exemptions, and Filing Requirements.

Land and Buildings Transaction Tax

This page provides an overview of the Land and Buildings Transaction Tax (LBTT) in Scotland, which is a tax applied to residential and commercial land and buildings transactions. It outlines the principles and concepts of LBTT.

• LBTT is applicable to property purchases and leases in Scotland.
• The tax is calculated based on the purchase price or lease premium.
• Different rates and bands apply depending on the transaction type.
• Reliefs and exemptions may be available under certain conditions.

Understanding Land and Buildings Transaction Tax in Scotland

When purchasing property in Scotland, one of the key considerations is the Land and Buildings Transaction Tax (LBTT). This tax is a significant part of the property buying process and understanding it can help you plan your finances better. In this article, we will explore what LBTT is, how it works, and what you need to know when buying property in Scotland.

What is Land and Buildings Transaction Tax?

Land and Buildings Transaction Tax is a tax applied to residential and commercial land and buildings transactions in Scotland. It replaced the UK Stamp Duty Land Tax (SDLT) in Scotland on 1 April 2015. The tax is administered by Revenue Scotland, and it applies to both residential and non-residential property transactions.

How LBTT Works

LBTT is calculated based on the purchase price of the property. It operates on a progressive tax system, meaning that different portions of the property price are taxed at different rates. This is similar to how income tax works, where different bands of income are taxed at different rates.

For example, if you buy a house for £300,000, the LBTT is calculated by applying different rates to portions of the purchase price. The first £145,000 might be taxed at 0%, the next £105,000 at 2%, and so on. This progressive system ensures that the tax is fairer and more proportionate to the value of the property.

Residential Property Rates

For residential properties, the LBTT rates are structured into bands. Here is a breakdown of the current rates:

• Up to £145,000: 0%
• £145,001 to £250,000: 2%
• £250,001 to £325,000: 5%
• £325,001 to £750,000: 10%
• Over £750,000: 12%

These rates apply to the portion of the property price within each band. For example, if you purchase a property for £400,000, you will pay:

• 0% on the first £145,000
• 2% on the next £105,000 (£145,001 to £250,000)
• 5% on the next £75,000 (£250,001 to £325,000)
• 10% on the remaining £75,000 (£325,001 to £400,000)

This results in a total LBTT of £13,350.

Non-Residential Property Rates

For non-residential properties, the rates and bands differ slightly. The current rates are:

• Up to £150,000: 0%
• £150,001 to £250,000: 1%
• Over £250,000: 5%

These rates apply to both the purchase of non-residential properties and leases. For example, if you buy a commercial property for £300,000, you will pay:

• 0% on the first £150,000
• 1% on the next £100,000 (£150,001 to £250,000)
• 5% on the remaining £50,000 (£250,001 to £300,000)

This results in a total LBTT of £4,500.

Additional Dwelling Supplement (ADS)

If you are purchasing an additional residential property, such as a second home or a buy-to-let investment, you may be liable for the Additional Dwelling Supplement (ADS). This is an extra charge on top of the standard LBTT rates.

The ADS is currently set at 4% of the total purchase price of the property. This applies to the entire purchase price, not just the portion above a certain threshold. For example, if you buy a second home for £200,000, you will pay an additional £8,000 in ADS.

Exemptions and Reliefs

There are certain exemptions and reliefs available that can reduce the amount of LBTT you need to pay. Some common exemptions include:

• Transactions involving charities
• Transfers between spouses or civil partners
• Property transactions as a result of divorce or dissolution of a civil partnership

In addition, there are reliefs available for certain types of transactions, such as:

• First-time buyer relief: This reduces the amount of LBTT for first-time buyers purchasing a property up to £175,000.
• Multiple dwellings relief: This applies when purchasing multiple properties in a single transaction, potentially reducing the overall LBTT payable.

Filing and Paying LBTT

Once you have calculated the LBTT due, the next step is to file a return and pay the tax. This must be done within 30 days of the effective date of the transaction, which is usually the date of completion.

The process involves submitting an LBTT return to Revenue Scotland, even if no tax is due. This can be done online through the Revenue Scotland portal. Once the return is submitted, you will receive a unique reference number to use when making the payment.

For more information on filing and paying LBTT, visit the Revenue Scotland website.

Conclusion

Understanding the Land and Buildings Transaction Tax is essential for anyone looking to buy property in Scotland. By familiarising yourself with the rates, bands, and potential reliefs, you can better plan your property purchase and avoid any unexpected costs. For further details and guidance, the Revenue Scotland website is a valuable resource.

Whether you are a first-time buyer, an investor, or simply looking to move home, knowing how LBTT works will help you make informed decisions and ensure a smoother property buying process.

Useful article? You may find it helpful to read the original guidance here: Revenue Scotland LBTT: Understanding Land and Buildings Transaction Tax in Scotland: Rates, Exemptions, and Filing Requirements.

View all LBTT Guidance Pages Here