Welsh Revenue Authority LTT: Technical Guidance on Tax Collection and Management Act 2016 in Wales

This webpage provides technical guidance on the Tax Collection and Management (Wales) Act 2016, specifically focusing on Part 6, which includes Chapters 1 to 7.

• Explains the provisions of the Tax Collection and Management (Wales) Act 2016.
• Focuses on Part 6 of the Act, covering Chapters 1 to 7.
• Offers detailed guidance for understanding the Act’s implementation.
• Serves as a resource for individuals and organisations dealing with tax collection in Wales.
• Available in both English and Welsh languages.

Understanding the Land and Buildings Transaction Tax in Scotland

The 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 guide aims to provide a comprehensive overview of LBTT, how it works, and what it means for individuals and businesses involved in property transactions in Scotland.

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 leases. The tax is progressive, meaning that the rate increases as the price of the property increases. This approach is designed to be fairer, ensuring that those purchasing higher-value properties pay more tax.

How is LBTT Calculated?

LBTT is calculated based on the purchase price of the property. The tax is structured in bands, with different rates applied to different portions of the purchase price. Here’s a breakdown of the bands for residential properties:

• 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 non-residential properties, the bands are slightly different:

• Up to £150,000: 0%
• £150,001 to £250,000: 1%
• £250,001 to £1,000,000: 5%
• Over £1,000,000: 6%

To calculate the LBTT due, you apply the relevant rate to each portion of the purchase price that falls within each band. For example, if you purchase a residential property for £300,000, you would pay:

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

This results in a total LBTT of £4,600.

Additional Dwelling Supplement (ADS)

In addition to the standard LBTT rates, there is an Additional Dwelling Supplement (ADS) for those purchasing 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 purchase a second home for £300,000, you would pay the standard LBTT of £4,600 plus an ADS of £12,000 (4% of £300,000), resulting in a total tax bill of £16,600.

Exemptions and Reliefs

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

• Transactions where no money changes hands, such as gifts or transfers between spouses or civil partners.
• Transactions involving certain public bodies and charities.

There are also reliefs available for certain types of transactions, such as:

• First-time buyer relief, which increases the nil rate band for first-time buyers to £175,000.
• Multiple dwellings relief, which can reduce the tax payable on the purchase of multiple properties.

Filing and Paying LBTT

When you purchase a property in Scotland, you must submit an LBTT return to Revenue Scotland and pay any tax due within 30 days of the transaction. This is typically handled by your solicitor or conveyancer as part of the property purchase process.

Failure to submit a return or pay the tax on time can result in penalties and interest charges, so it’s important to ensure that everything is filed correctly and promptly.

LBTT and Leases

LBTT also applies to leases of non-residential properties. The tax is calculated based on the net present value (NPV) of the rent payable over the term of the lease. There are different rates and bands for lease transactions, and specific rules apply to the calculation of NPV.

For more detailed information on how LBTT applies to leases, you can visit the Revenue Scotland website.

Conclusion

The Land and Buildings Transaction Tax is an important consideration for anyone involved in property transactions in Scotland. Understanding how the tax works, the rates and bands, and the available exemptions and reliefs can help you plan and budget effectively for your property purchase.

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

Useful article? You may find it helpful to read the original guidance here: Welsh Revenue Authority LTT: Technical Guidance on Tax Collection and Management Act 2016 in Wales

View all WRA LTT Guidance Pages Here