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WHAT IS LAND AND BUILDINGS TRANSACTION TAX?

Land and Buildings Transaction Tax (LBTT) is a property tax applied to the purchase of residential and commercial land or property in Scotland.

LBTT replaced UK Stamp Duty Land Tax (SDLT) in Scotland from 1 April 2015.

How to Calculate the Land and Buildings Transaction Tax Due?

Minimum Property Purchase Price Maximum Property Purchase Price LBTT Rate (only applicable to the part of the property price falling within each band)
£0 £145,000 0%
£145,001 £250,000 2%
£250,001 £325,000 5%
£325,001 £750,000 10%
Over £750,000 12%

 

LBTT is designed so that the charge is proportionate to the actual price of the property. The percentage for each band in LBTT is applied only to the part of the price over the relevant threshold and up to the next threshold. If you buy a property for less than the starting threshold or pay no money for the property, there is no LBTT to pay.

For example, if you purchase a house for £280,000, the LBTT you owe is calculated as follows:

0% on the first £145,000 £0
2% on the next £105,000 £2,100
5% on the next £30,000 £1,500

Total LBTT payable: £3,600

First Time Buyer Relief from Land and Buildings Transaction Tax

You can get first-time buyer relief if you buy a property for the first time in Scotland. This relief means tax is not chargeable in respect of the first £175,000 of the purchase price payable. You’ll be able to claim the relief at the point when your solicitor submits your LBTT return.

Criteria for First Time Buyer Relief

A first-time buyer will need to meet certain criteria to qualify for the tax relief. These conditions are listed on the Revenue Scotland website:

1. The transaction is an acquisition of a major interest in land;
2. The land consists entirely of residential property and includes a dwelling;
3. The buyer is a first-time buyer who intends to occupy the dwelling as their only or main residence;
4. The transaction is not a linked transaction; and
5. The transaction is not one to which Additional Dwelling Supplement (“ADS”) applies.

Where there is more than one buyer the relief will be available only if each buyer meets all the relevant criteria. If any of the buyers do not meet all the conditions, then the relief will not be available.

Amount of Relief
The relief effectively raises the zero-tax threshold for first-time buyers from £145,000 to £175,000.If your first-time purchase is for a property that costs more than £175,000, you’ll only pay tax on the portion of the price above £175,000. There’s no upper limit, so whatever the price of your property, you’ll still get the relief on the first £175,000 of the price. Here’s a table with some examples:

Purchase Price Tax due – with relief Tax due – without relief
£150,000 £0 £100
£175,000 £0 £600
£200,000 £500 £1,100
£250,000 £1,500 £2,100

Land and Buildings Transaction Tax on Second Homes

Buyers of additional residential properties will have to pay Additional Dwelling Supplement as well as LBTT. This will be charged at a rate of 4% of the total purchase price for properties costing more than £40,000.

For more information regarding Additional Dwelling Supplement, please view our blog post titled “What is Additional Dwelling Supplement”.

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

You will pay the LBTT due over the transaction to Revenue Scotland on the date of entry. If you fail to do submit an LBTT return, Revenue Scotland might charge penalties and interest.

We will submit the LBTT return on your behalf after you have completed the purchase of your new property.

MHD Law’s Conveyancing team is always available to assist you with queries such as this. If you wish to discuss or obtain advice in relation to the above or the conveyancing process, please get in touch with our Conveyancing Team on 0131 555 0616 or edinburgh@mhdlaw.co.uk.