LBTT is a form of taxation governed by the Land and Buildings Transaction Tax (Scotland) Act 2013. It applies to residential land and buildings, both freehold and leasehold, which are purchased or transferred in exchange for payment. If this tax applies, you must submit an LBTT return to Revenue Scotland, otherwise, you could face a penalty. Even if no tax payment is due, the LBTT return must still normally be submitted.
This information only applies in Scotland
Any property or land purchased in England or Northern Ireland over a certain price is subject to Stamp Duty Land Tax (SDLT). In Scotland, the equivalent tax to Stamp Duty is Land and Buildings Transaction Tax (LBTT).
What is Land and Buildings Transaction Tax?
How much LBTT will I pay if I am buying my first home?
In Scotland, you can claim first time buyer relief on LBTT. If you are:
buying your first home, and
completing your house purchase on or after 30th June 2018
You don't have to pay any tax if the house price is up to £175,000. If the property is above £175,000, first time buyers will still benefit from the relief on the first £175,000 of the price. In this situation, the top of the ‘nil rate’ band has essentially been raised to £175,000.
What are the LBTT residential property rates in Scotland?
As of 31 March 2022, the bottom LBTT threshold stands at £145,000 for residential properties. This means that property which is purchased for less than this price (or is worth less than this amount if it is being transferred in exchange for payment) is not liable for LBTT. The current LBTT rates are as follows:
any portion below £145,000 = 0% (the ‘nil rate’ band)
any portion of £145,001 to £250,000 = 2%
any portion of £250,001 to £325,000 = 5%
any portion of £325,001 to £750,000 = 10%
any portion above £750,000 = 12%
These rates will not change during the 2022-23 tax year (which begins and ends in April).
Example: Frank buys a house for £280,000. He pays no LBTT on the first £145,000. He pays 2% of the next £105,000 = £2,100. He pays 5% on the remaining £30,000 = £1,500. So in total Frank must pay £2,100 + £1,500 = £3,600.
A higher rate of LBTT is normally payable in respect of purchases of additional residential properties costing over £40,000; this is usually 4% above the normal LBTT rates. This is called the Additional Dwelling Supplement (ADS).
During the height of the Coronavirus (COVID-19) pandemic, the top of the nil rate band was raised in recognition of the difficulties facing the property sector. This change lapsed on 1 April 2021, and the LBTT rates returned to normal.
What happens when property is transferred or left in a will?
The rules that apply to LBTT rates for inherited or gifted property in Scotland are similar to the rules for SDLT elsewhere in the UK. LBTT often doesn’t need to be paid when property is received as a bequest or a gift, but there are exceptions.
Are there any exemptions?
Exemptions can apply where:
the property is transferred due to divorce or dissolution of a civil partnership
the property is left in a will
no money or payment changes hands (ie the property is a gift)