Welsh Revenue Authority LTT: Guidance on Land Transaction Tax Relief for Alternative Finance Bonds

This webpage provides technical guidance on Land Transaction Tax (LTT) relief for alternative finance investment bonds.

• Explains the principles of LTT and its application to alternative finance.
• Details the specific relief available for investment bonds under this tax.
• Offers insights into the legal framework governing these financial instruments.
• Provides practical examples to illustrate the application of the tax relief.
• Serves as a resource for understanding the nuances of LTT in alternative finance contexts.

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 buildings 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 guide to LBTT, its rates, and how it impacts 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 transactions, including leases. The tax is progressive, meaning that it is calculated based on the portion of the purchase price that falls within each tax band.

How LBTT Works

LBTT is calculated differently for residential and non-residential properties. The tax is structured in bands, with different rates applied to different portions of the purchase price.

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:

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

Total LBTT = £4,600

Non-Residential Property Rates

For non-residential properties, 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:

• £150,000 at 0% = £0
• £100,000 at 1% = £1,000
• £150,000 at 5% = £7,500

Total LBTT = £8,500

Additional Dwelling Supplement (ADS)

In addition to the standard LBTT rates, there is an Additional Dwelling Supplement (ADS) for 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 on top of the standard LBTT rates.

For example, if you buy a second home for £300,000, the ADS would be £12,000 (4% of £300,000), in addition to the standard LBTT of £4,600, making the total tax payable £16,600.

Reliefs and Exemptions

There are several reliefs and exemptions available under LBTT, which can reduce the amount of tax payable. Some of the key reliefs include:

First-Time Buyer Relief

First-time buyers purchasing a residential property for £175,000 or less are eligible for relief, which means they pay no LBTT. For properties costing more than £175,000, first-time buyers will benefit from a reduction in the amount of tax payable.

Charity Relief

Charities may be eligible for relief from LBTT when purchasing land or property for charitable purposes. This relief can apply to the whole or part of the transaction.

Multiple Dwellings Relief

This relief is available when purchasing multiple dwellings in a single transaction. It allows for a reduction in the overall LBTT payable by calculating the tax on the average price of the dwellings rather than the total price.

Filing and Payment

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

Conclusion

Understanding LBTT is essential for anyone involved in property transactions in Scotland. The tax is designed to be fair and progressive, ensuring that those purchasing higher-value properties contribute more. By being aware of the rates, reliefs, and filing requirements, buyers can ensure they meet their obligations and take advantage of any available savings.

For more detailed information on LBTT, including guidance on specific scenarios and reliefs, visit the official Revenue Scotland website: Revenue Scotland – Land and Buildings Transaction Tax.

Useful article? You may find it helpful to read the original guidance here: Welsh Revenue Authority LTT: Guidance on Land Transaction Tax Relief for Alternative Finance Bonds

View all WRA LTT Guidance Pages Here