Guidance on Debt as Consideration in Land and Buildings Transaction Tax (LBTT)

LBTT and debt as chargeable consideration

For LBTT, consideration is not limited to cash. A land transfer can still be taxable if an existing debt, such as a mortgage, is taken on, released, discharged or indemnified as part of the transaction. The key issue is whether liability for an existing debt changes in connection with the property transfer.

• Debt can count as chargeable consideration, including where the buyer assumes an existing debt or where a seller’s debt is released or satisfied.
• The amount of debt treated as consideration is usually the amount assumed, released or discharged, but it cannot exceed the market value of the property transferred.
• In shared ownership cases, the chargeable consideration is usually based on the share acquired, such as half of an existing mortgage for a half share transfer.
• If the parties replace an old mortgage with a completely new one, and no existing debt is assumed, there may be no chargeable consideration from the debt element.
• Legal liability matters: if the transferor stays liable and there is no lender release or indemnity, there may be no assumption of debt for LBTT purposes.
• Once debt-based consideration is identified, the normal LBTT rules apply and ADS may also apply if the dwelling conditions are met.

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LBTT and debt as consideration in a land transaction

This page explains when debt counts as chargeable consideration for Land and Buildings Transaction Tax (LBTT). This matters because a transfer of land can be taxable even where little or no cash changes hands. If, as part of the transaction, a debt is released, taken over, or otherwise shifted between the parties, that debt may itself be the consideration on which LBTT is charged.

What this rule is about

LBTT is charged by reference to the chargeable consideration given for a land transaction. Consideration is not limited to cash. It can also include money’s worth, including debt.

The guidance deals with situations where:

• a debt owed by the seller is satisfied or released as part of the deal,
• the buyer assumes an existing debt, or
• one party’s liability for a debt changes in connection with the transfer.

This often arises where property is transferred between spouses, partners, co-owners or other connected persons, especially where there is an existing mortgage.

What the official source says

Revenue Scotland’s guidance says that chargeable consideration can include:

• the satisfaction or release of a debt due to the buyer or owed by the seller, and
• the buyer’s assumption of an existing debt.

It does not matter whether the debt is assumed, released or discharged in whole or in part. The amount of debt involved is the amount taken as consideration, although that amount cannot exceed the market value of the property transferred.

For LBTT purposes, a buyer is treated as assuming a debt where, in connection with the land transaction:

• a debt secured on the property exists immediately before and immediately after the transaction, and a party’s rights or liabilities in relation to that debt change,
• there is an agreement under which someone becomes liable for an existing debt when they were not previously liable, or
• one party indemnifies another against liability for a debt.

The guidance also says that if a debt is discharged or released, wholly or partly, in connection with the transaction, the amount discharged or released is chargeable consideration.

Where property is owned in undivided shares, and a secured debt is assumed, the consideration is worked out by reference to the share of the property held by the person concerned. The guidance gives the example of a £500,000 mortgage originally held by one person, where another person acquires an equal undivided share: the chargeable consideration is £250,000.

Debt is defined broadly as an obligation to pay money, whether certain or contingent, now or in the future.

What this means in practice

The practical question is not just whether money is being paid for the property. You also need to ask whether the transferee is taking on an economic burden that they did not previously have.

A common example is a transfer of a share in a home subject to an existing mortgage. If the incoming owner agrees to take responsibility for part of that existing mortgage, that assumed debt can be chargeable consideration for LBTT.

By contrast, if the parties take out an entirely new mortgage as part of the transfer, and no existing debt is being assumed, the guidance says there may be no chargeable consideration from the debt side at all.

The distinction between an existing mortgage and a new mortgage is therefore important.

The guidance also shows that legal liability matters. If someone transfers land but remains liable to the lender and is not indemnified by the transferee, there may be no assumption of debt and therefore no chargeable consideration from the mortgage. On the other hand, if the lender releases them, or the transferee indemnifies them, that change in liability can bring the debt into charge.

Additional Dwelling Supplement (ADS) is then considered separately. If there is chargeable consideration and the transaction is an acquisition of a dwelling that meets the ADS conditions, ADS may apply. The guidance’s examples show that the debt amount used as chargeable consideration is also the amount on which ADS is considered.

How to analyse it

A sensible way to analyse these cases is to work through the following questions.

• Is there a land transaction for LBTT purposes?
• Is any money being paid?
• Is there an existing debt connected with the property, such as an existing mortgage?
• Immediately before and after the transaction, who is liable for that debt?
• Does the transferee become liable for a debt they did not previously owe?
• Is an existing owner being released from liability, or indemnified against it?
• If the property is held in undivided shares, what proportion of the debt corresponds to the share being acquired?
• Does the total debt taken as consideration exceed the market value of the property transferred? If so, the guidance says the amount cannot exceed market value.
• Once chargeable consideration is identified, do the ordinary LBTT rules and, where relevant, ADS rules apply?

In practice, the key documents are often:

• the transfer deed,
• the mortgage terms,
• any lender consent or release, and
• any indemnity agreement between the parties.

Those documents help show whether there has actually been a change in debt liability, rather than just a transfer of legal title.

Example

Illustration: A owns a house alone. It is subject to an existing mortgage of £300,000. A transfers a half share to B. B pays no cash, but agrees to take on liability for half of the existing mortgage.

Under the guidance, the chargeable consideration is £150,000, being half of the existing mortgage. LBTT is then considered by reference to that amount.

Now change the facts slightly. Instead of taking on the existing mortgage, A and B redeem it and enter into a completely new joint mortgage at the same time as the transfer. On the guidance’s example, there is no assumption of an existing debt, so there is no chargeable consideration arising from debt on those facts.

A further variation is important. Suppose B acquires the half share, but A remains liable to the lender exactly as before, and B does not indemnify A. The guidance indicates there may be no chargeable consideration, because there has been no relevant change in either party’s liability for the debt.

Why this can be difficult in practice

The difficult part is often identifying whether there has really been an assumption of debt, rather than simply a rearrangement of ownership.

Several points can be fact-sensitive:

• whether the mortgage is genuinely a new debt or a continuation of an existing one,
• whether the outgoing owner has actually been released by the lender,
• whether an indemnity is legally effective and connected with the land transaction, and
• how to apportion debt where property is held in shares.

Joint and several liability can also be confusing. The guidance’s examples show that even where both parties are each liable for the whole debt, the chargeable consideration may still be attributed by reference to the share acquired. The legal form of the liability and the economic effect of the transfer both need careful attention.

Pension fund transactions are a separate area addressed briefly in the guidance. Revenue Scotland says that although a pension fund’s purchase of property can be a land transaction, the assumed liability to pay pension benefits will not generally be treated as chargeable consideration in the form of debt. However, any money or money’s worth actually given for the transfer can still be chargeable. The use of the word “generally” is important: it signals that the conclusion depends on the nature of the liability and the facts of the transaction.

The guidance also notes a change of published position in relation to pension fund transfers following a technical bulletin issued in December 2017. Revenue Scotland says it will consider repayment claims for taxpayers who previously filed and paid LBTT on the basis of the earlier October 2016 view, subject to the relevant time limits and repayment routes.

Key takeaways

• For LBTT, consideration can include debt, not just cash.
• An existing mortgage can create chargeable consideration if liability for that debt is assumed, released, discharged or indemnified in connection with the transfer.
• If there is no assumption of existing debt and no change in liability, there may be no chargeable consideration even where property is transferred.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Guidance on Debt as Consideration in Land and Buildings Transaction Tax (LBTT)

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