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.
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 is Land and Buildings Transaction Tax (LBTT).
What is Land and Buildings Transaction Tax?
What is the Government's LBTT holiday?
The Government announced that between 15 July 2020 and 31 March 2021 reduced LBTT rates will apply on residential property. These rates are as follows:
Any portion of up to £250,000 = 0%
Any portion between £250,001 and £325,000 = 5%
Any portion between £325,001 to £750,000 = 10%
Any portion above £750,000 = 12%
Example: Frank buys a house for £350,000. He pays no LBTT on the first £250,000. He pays 5% of the next £75,000 = £3,750. He pays 10% on the remaining £25,000 = £2,500. So in total Frank must pay £3,750 + £2,500 = £6,520.
If you buy an additional property from 15 July, you'll still need to pay the extra 4% (as set out below) but will still benefit from the raised threshold for standard LBTT.
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.
What are the LBTT residential property rates in Scotland?
Please note that these rates have been replaced with the LBTT reduced rates until 31 March 2021. On 1 April 2021, LBTT rates will revert to the rates set out below.
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 4% 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 stamp duty.
For LBTT liability on other types of property transfer in Scotland, see Revenue Scotland.
Are there any exemptions?
Exemptions 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)
For further information on LBTT exemptions and reliefs, see Revenue Scotland.