Welsh Revenue Authority LTT: Guidance on Calculating Land Transaction Tax in Wales: Technical Overview

This webpage provides technical guidance on calculating the Land Transaction Tax payable, as outlined in Part 3 of the Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Act 2017.

• Explains the principles of Land Transaction Tax in Wales.
• Details the anti-avoidance measures included in the legislation.
• Offers a comprehensive guide for understanding tax calculations.
• Provides resources and links for further information.
• Available in both English and Welsh languages.

Understanding Land and Buildings Transaction Tax (LBTT) in Scotland

Land and Buildings Transaction Tax (LBTT) is a tax applied to residential and commercial land and property transactions in Scotland. It replaced the UK Stamp Duty Land Tax (SDLT) in Scotland from 1 April 2015. This article aims to provide a comprehensive overview of LBTT, its application, and how it affects property transactions.

What is LBTT?

LBTT is a tax levied on the purchase of land and buildings in Scotland. It applies to both residential and non-residential properties, including land purchases. The tax is payable by the buyer in a property transaction and is calculated based on the purchase price of the property.

How is LBTT Calculated?

LBTT is calculated using a progressive tax system, which means that different portions of the property price are taxed at different rates. This system is designed to be fairer, ensuring that those purchasing more expensive properties pay a higher proportion of tax.

Residential Property Rates

For residential properties, the LBTT rates are structured 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:

• 0% on the first £145,000 = £0
• 2% on the next £105,000 (£145,001 to £250,000) = £2,100
• 5% on the next £50,000 (£250,001 to £300,000) = £2,500

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

Non-Residential Property Rates

For non-residential properties, the LBTT rates are as follows:

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

For example, if you purchase a commercial property for £500,000, the LBTT would be calculated as follows:

• 0% on the first £150,000 = £0
• 1% on the next £100,000 (£150,001 to £250,000) = £1,000
• 5% on the remaining £250,000 (£250,001 to £500,000) = £12,500

Total LBTT = £0 + £1,000 + £12,500 = £13,500

Additional Dwelling Supplement (ADS)

The Additional Dwelling Supplement (ADS) is an extra charge on purchases of additional residential properties, such as buy-to-let properties or second homes. The ADS is charged at 4% of the total purchase price and is payable in addition to the standard LBTT rates.

For instance, if you buy a second home for £200,000, you will pay the standard LBTT plus the ADS:

• Standard LBTT = £1,100 (2% on £55,000)
• ADS = 4% of £200,000 = £8,000

Total LBTT including ADS = £1,100 + £8,000 = £9,100

Exemptions and Reliefs

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

• First-time buyer relief: This relief reduces the amount of LBTT payable by first-time buyers purchasing a property up to £175,000.
• Charities relief: Transactions involving charities may be eligible for relief from LBTT.
• Group relief: Transfers of property within a group of companies may qualify for group relief, exempting them from LBTT.

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

Filing and Payment

LBTT returns must be submitted to Revenue Scotland, and the tax must be paid within 30 days of the effective date of the transaction, which is usually the date of completion. Failure to file the return or pay the tax on time can result in penalties and interest charges.

Most LBTT returns are filed and paid by solicitors or conveyancers on behalf of their clients. However, it is ultimately the buyer’s responsibility to ensure that the return is filed and the tax is paid.

Conclusion

Understanding LBTT is essential for anyone involved in property transactions in Scotland. By knowing how the tax is calculated and what exemptions or reliefs may apply, buyers can better plan their finances and avoid unexpected costs. For further information, you can visit the Revenue Scotland LBTT page.

Whether you’re a first-time buyer, purchasing a second home, or investing in commercial property, being informed about LBTT will help you navigate the property market with confidence.

Useful article? You may find it helpful to read the original guidance here: Welsh Revenue Authority LTT: Guidance on Calculating Land Transaction Tax in Wales: Technical Overview

View all WRA LTT Guidance Pages Here