Welsh Revenue Authority LTT: Guidance on Land Transaction Tax for Practitioners from April 2018

This page provides guidance for practitioners on determining the applicable tax for land transactions from 1 April 2018, developed in collaboration with HMRC.

• Guidance is available to help practitioners understand applicable taxes.
• Focuses on land transaction tax effective from 1 April 2018.
• Jointly drafted with HMRC, ensuring comprehensive coverage.
• Accessible on both GOV.WALES and HMRC websites.
• Includes transitional guidance for smooth implementation.
• Available in both English and Welsh languages.

Understanding Land and Buildings Transaction Tax (LBTT) in Scotland

The Land and Buildings Transaction Tax (LBTT) is a tax applied to residential and commercial land and property transactions in Scotland. Introduced on 1 April 2015, it replaced the UK Stamp Duty Land Tax (SDLT) in Scotland. This article aims to provide a clear understanding of LBTT, its rates, and how it affects 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. The tax is progressive, meaning that the rate increases as the price of the property increases. This system is designed to be fairer than the previous SDLT, as it reduces the tax burden on lower-value properties and increases it for higher-value ones.

How LBTT Works

LBTT is calculated based on the purchase price of the property. The tax is structured in bands, with different rates applied to each band. This means that you only pay the higher rate on the portion of the property price that falls within each band.

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:

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

• 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:

• 0% on the first £150,000 = £0
• 1% on the next £100,000 (£150,001 to £250,000) = £1,000
• 5% on the remaining £150,000 (£250,001 to £400,000) = £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 investment, you may be liable to pay the Additional Dwelling Supplement (ADS). This is an extra 4% on top of the standard LBTT rates. ADS is applicable if you already own a residential property anywhere in the world and are buying another one in Scotland.

For more information on ADS and how it applies, you can visit the official Revenue Scotland website.

Exemptions and Reliefs

There are certain exemptions and reliefs available under LBTT. These can reduce the amount of tax you need to pay or exempt you from paying it altogether. Some common exemptions and reliefs include:

• Charity Relief: Available for properties purchased by registered charities.
• Group Relief: Applicable for property transfers within a group of companies.
• First-Time Buyer Relief: Offers a reduction in LBTT for first-time buyers purchasing a property up to £175,000.

For a comprehensive list of exemptions and reliefs, you can refer to the Revenue Scotland guidance.

Filing and Paying LBTT

Once a property transaction is completed, the buyer must submit an LBTT return to Revenue Scotland and pay any tax due. This must be done within 30 days of the effective date of the transaction, which is usually the date of completion.

Failure to submit the return or pay the tax on time can result in penalties and interest charges. It’s important to ensure that all paperwork is completed accurately and promptly to avoid these additional costs.

Conclusion

The Land and Buildings Transaction Tax is an essential consideration for anyone buying property in Scotland. Understanding how it works, the rates applicable, and any potential exemptions or reliefs can help you plan your purchase more effectively. Whether you are a first-time buyer, purchasing a second home, or investing in commercial property, being informed about LBTT can save you time and money.

For further details, guidance, and updates on LBTT, you can visit the Revenue Scotland website.

Useful article? You may find it helpful to read the original guidance here: Welsh Revenue Authority LTT: Guidance on Land Transaction Tax for Practitioners from April 2018

View all WRA LTT Guidance Pages Here