Land and Buildings Transaction Tax explained

Buying a property in Scotland? You may need to pay Land and Buildings Transaction Tax. Find out what the rates are and how it works.

Buying a property in Scotland? You may need to pay Land and Buildings Transaction Tax. Find out what the rates are and how it works.

Mark Gordon
From the Mortgages team
3
minute read
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Posted 18 AUGUST 2021

What is Land and Buildings Transaction Tax? 

Land and Buildings Transaction Tax (LBTT) is a tax you pay when you buy a property in Scotland over a certain cost. It replaced Stamp Duty – which is paid in England and Northern Ireland – in Scotland on 1 April 2015. In Wales, this type of tax is called Land Transaction Tax

What are the LBTT rates? 

You’ll need to pay Land and Buildings Transaction Tax if the residential property you’re buying costs more than £145,000. LBTT goes up in bands – you pay the band rate on the portion of the purchase price that’s in that band.

From April 2021, the LBTT rates are:

Purchase price

LBTT rate

Up to £145,000

0%

£145,001-£250,000

2%

£250,001-£325,000

5%

£325,001-£750,000

10%

Over £750,000

12%

 

For example, if you buy a house for £250,00, the LBTT will be:

0% on the first £145,000

2% on the next £105,000 = £2,100

Total LBTT = £2,100

What about Land and Buildings Transaction Tax for first-time buyers? 

If you’re buying a property for the first time, you won’t have to pay LBTT on the first £175,000 of your purchase. So if the property costs £175,000 or less, you won’t have to pay LBTT at all.

To qualify for the tax relief, you’ll need to be intending to live in the property as your only or main residence. You’ll also need to meet other criteria set out by Revenue Scotland.

What is the LBTT Additional Dwelling Supplement? 

The Additional Dwelling Supplement (ADS) is a surcharge on buying a second property. If you’re buying a buy-to-let property or second home in Scotland, you’ll pay 4% on the total purchase price of homes costing £40,000 or more as well as the standard rates of LBTT. 

For example, if you bought a holiday home with a purchase price of £250,000, you’d pay:  

  • 0% LBTT on first £145,000 = £0
  • 2% LBTT on remaining £105,000 = £2,100
  • 4% ADS of full purchase price = £10,000
  • Total LBTT + ADS = £12,100 

You’ll need to pay the supplement if you – or your spouse, civil partner, cohabitant or dependent children – own another property anywhere in the world with a market value of at least £40,000.

Can you avoid paying the Additional Dwelling Supplement on a second home? 

You don’t have to pay the ADS if your second property: 

  • costs less than £40,000
  • is a caravan, houseboat or mobile home.

Can I claim back the Additional Dwelling Supplement? 

If you buy a second property that you intend to use as your main residence, but don’t sell your existing property immediately, you’ll need to pay ADS. But if you sell your first property within 18 months, you can reclaim the Additional Dwelling Supplement. There’s an extension to 36 months for people who bought a new main residence between 24 September 2018 and 24 March 2020.  

For instructions on reclaiming ADS, see Revenue Scotland.

Is there a Land and Buildings Transaction Tax holiday? 

As part of the Scottish Government’s response to the COVID-19 pandemic, the threshold for paying LBTT was temporarily raised to £250,000 on 15 July 2020. However, this ‘holiday’ ended on 31 March 2021.

Are there any exemptions for paying LBTT? 

Very few. You’ll need to pay LBTT on most property purchases, regardless of whether you have a mortgage, so you’ll need to factor it in when you’re thinking of how much you have to spend on a property. 

You won’t have to pay LBTT if the property: 

  • Costs less than £145,000
  • Is one you’ve inherited
  • Is transferred to you from a spouse or civil partner following a separation or divorce

When do you have to pay Land and Buildings Transaction Tax? 

You have 30 days to pay LBTT after you’ve purchased your property. In practice, LBTT is usually paid at the time the transaction is made, as the title deed can’t be registered until the tax is paid. If the tax isn’t paid on time, you may have to pay a penalty, as well as interest.

How do you pay Land and Buildings Transaction Tax? 

Your solicitor will usually make the payment to Revenue Scotland on your behalf, using money provided by you. It’s also possible to pay the tax yourself online, by BACS or by Direct Debit. For full instructions on how to do it, see Revenue Scotland.

Where can I find an LBTT calculator? 

Revenue Scotland has a calculator for LBTT and the Additional Dwelling Supplement.

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