Revenue Scotland LBTT: Understanding Land and Buildings Transaction Tax: A Guide by Revenue Scotland

Principles and Concepts of LBTT

This section introduces the fundamental principles and concepts of the Land and Buildings Transaction Tax (LBTT) as outlined in Chapter 1 of the legislation guidance. It explains the workings of LBTT, a tax applied to land and property transactions in Scotland.

• LBTT is a tax on property transactions in Scotland.
• It applies to both residential and non-residential properties.
• The guidance provides detailed information on how the tax is calculated.
• It covers exemptions and reliefs available under the tax.

Understanding Land and Buildings Transaction Tax (LBTT) in Scotland

The Land and Buildings Transaction Tax (LBTT) is a tax applied to residential and non-residential land and property transactions in Scotland. Introduced in April 2015, it replaced the UK Stamp Duty Land Tax (SDLT) in Scotland. This article aims to provide a comprehensive overview of how LBTT works, who it affects, and how it is calculated.

What is LBTT?

LBTT is a tax that buyers need to pay when purchasing property or land in Scotland. It applies to both residential and commercial transactions. The tax is administered by Revenue Scotland, which is responsible for ensuring compliance and collecting the tax.

Who Pays LBTT?

LBTT is payable by the buyer in a property transaction. Whether you are buying a new home, a commercial property, or land, you will need to consider LBTT as part of your purchasing costs. It is important to factor this tax into your budget when planning a property purchase.

How is LBTT Calculated?

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

Residential Property Rates

For residential properties, the LBTT rates are as follows:

• 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%

For example, if you purchase a house for £300,000, the LBTT would be calculated as follows:

• The first £145,000 is taxed at 0% = £0
• The next £105,000 (£145,001 to £250,000) is taxed at 2% = £2,100
• The remaining £50,000 (£250,001 to £300,000) is taxed at 5% = £2,500

Total LBTT = £0 + £2,100 + £2,500 = £4,600

Non-Residential Property Rates

For non-residential properties and land, the LBTT rates are:

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

For example, if you purchase a commercial property for £400,000, the LBTT would be calculated as follows:

• The first £150,000 is taxed at 0% = £0
• The next £100,000 (£150,001 to £250,000) is taxed at 1% = £1,000
• The remaining £150,000 (£250,001 to £400,000) is taxed at 5% = £7,500

Total LBTT = £0 + £1,000 + £7,500 = £8,500

Additional Dwelling Supplement (ADS)

If you are purchasing an additional residential property, such as a second home or a buy-to-let property, you may be liable to pay an 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. For example, if you buy a second home for £200,000, you would pay an additional £8,000 in ADS (4% of £200,000).

Exemptions and Reliefs

There are certain circumstances where LBTT may not be payable, or where reliefs are available to reduce the amount of tax due. Some common exemptions and reliefs include:

• First-Time Buyer Relief: First-time buyers purchasing a property up to £175,000 may be eligible for relief, reducing the amount of LBTT payable.
• Charities Relief: Transactions involving charities may be eligible for relief.
• Group Relief: Transfers of property within a group of companies may qualify for relief.

For more detailed information on exemptions and reliefs, you can visit the Revenue Scotland website.

Filing and Paying LBTT

Once you have calculated the amount of LBTT due, you must file a return with Revenue Scotland and pay the tax within 30 days of the effective date of the transaction. This is usually the date of completion.

Failure to file and pay on time can result in penalties and interest charges, so it is important to ensure that these requirements are met promptly.

Conclusion

The Land and Buildings Transaction Tax is an important consideration for anyone buying property or land in Scotland. Understanding how it works, who it affects, and how it is calculated can help you plan your purchase more effectively and avoid unexpected costs.

For more information and guidance on LBTT, including detailed examples and scenarios, you can visit the Revenue Scotland website.

Useful article? You may find it helpful to read the original guidance here: Revenue Scotland LBTT: Understanding Land and Buildings Transaction Tax: A Guide by Revenue Scotland

View all LBTT Guidance Pages Here