LBTT is a form of taxation that 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 a 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.
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 is Land and Buildings Transaction Tax (LBTT).
What is Land and Buildings Transaction Tax?
How much stamp duty will I pay if I am buying my first home?
In Scotland, if you are buying your first home 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 will qualify for this tax relief.
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.
What are the LBTT residential property rates in Scotland?
Currently (as of 12 July 2018), the LBTT threshold stands at £145,000 for residential properties; 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 rates are as follows:
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%
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 3% above the normal LBTT rates.
What happens when property is transferred or left in a will?
In Scotland, the same rules apply to LBTT on inherited and gifted property as they do for SDLT.
For LBTT liability on other types of property transfer in Scotland, see Revenue Scotland.
Are there any exemptions?
In Scotland, exemptions apply where:
Property is transferred due to divorce or dissolution of a civil partnership
Property is left in a will
No money or payment changes hands (ie the property is a gift)
For further information on LBTT exemptions and reliefs, see Revenue Scotland.