Land and Buildings Transaction Tax

Who pays the tax?

LBTT is payable by the pur­chas­er in a land trans­ac­tion occur­ring in Scot­land. Stamp Duty Land Tax (SDLT) applies to land trans­ac­tions in Eng­land and North­ern Ire­land and Land Trans­ac­tion Tax (LTT) applies in Wales.

What is a land transaction?

A trans­ac­tion will trig­ger lia­bil­i­ty if it involves the acqui­si­tion of an inter­est in land. This includes a sim­ple con­veyance of land such as buy­ing a house, cre­at­ing a lease or assign­ing a lease.

When is the tax payable?

Indi­vid­u­als must send an LBTT return and pay the tax due to the WRA with­in 30 days of the day after com­ple­tion (or oth­er effec­tive date of the trans­ac­tion). Penal­ties and inter­est may be charged if you fail to file your LBTT return or pay the nec­es­sary tax with­in the 30 days after the day of com­ple­tion. The tax has to be paid when a con­tract has been sub­stan­tial­ly per­formed. In cas­es where the pur­chas­er takes pos­ses­sion of the prop­er­ty on com­ple­tion, that will be the date. How­ev­er, if the pur­chas­er effec­tive­ly takes pos­ses­sion before com­ple­tion — known as ‘rest­ing on con­tract’ — that will be regard­ed as trig­ger­ing the tax.

Residential rates of LBTT

The rates of LBTT which apply from 1 April 2021 are set out in the fol­low­ing table:

The rates apply to the por­tion of the total val­ue which falls with­in each band.

First-time buyer relief

A LBTT relief applies for first-time buy­ers of prop­er­ties up to £175,000. The relief rais­es the zero tax thresh­old for first-time buy­ers from £145,000 to £175,000. First-time buy­ers pur­chas­ing a prop­er­ty above £175,000 also ben­e­fit from the relief on the por­tion of the price below the thresh­old. All first-time buy­ers will ben­e­fit from a relief of up to £600.

Higher rates for additional residential properties

High­er rates of LBTT are charged on pur­chas­es of addi­tion­al res­i­den­tial prop­er­ties (above £40,000), such as buy to let prop­er­ties and sec­ond homes.

The main tar­get of the high­er rates is pur­chas­es of buy to let prop­er­ties or sec­ond homes. How­ev­er, there will be some pur­chasers who will have to pay the addi­tion­al charge even though the prop­er­ty pur­chased will not be a buy to let or a sec­ond home. The 36 month rules set out below will help to remove some trans­ac­tions from the addi­tion­al rates (or allow a refund). The 36 month time­frame was extend­ed from 18 months with effect from 1 April 2024. Care will be need­ed if an indi­vid­ual already owns, or part­ly owns, a prop­er­ty and trans­acts to pur­chase anoth­er prop­er­ty with­out hav­ing dis­posed of the first prop­er­ty.

The high­er rates are 8% above those shown in the table above, hav­ing increased from 6% from 5 Decem­ber 2024. The high­er rates poten­tial­ly apply if, at the end of the day of the pur­chase trans­ac­tion, the indi­vid­ual owns two or more res­i­den­tial prop­er­ties.

Some fur­ther detail:

• Pur­chasers will have 36 months to claim a refund of the high­er rates if they buy a new main res­i­dence before dis­pos­ing of their pre­vi­ous main res­i­dence.
• Pur­chasers will also have 36 months between sell­ing a main res­i­dence and replac­ing it with anoth­er main res­i­dence with­out hav­ing to pay the high­er rates, if they also own anoth­er prop­er­ty which is not their main res­i­dence.
• A small share in a prop­er­ty which has been inher­it­ed with­in the 36 months pri­or to a trans­ac­tion will not be con­sid­ered as an addi­tion­al prop­er­ty when apply­ing the high­er rates.
• There will be no exemp­tion from the high­er rates for sig­nif­i­cant investors.
  

Non-residential rates of LBTT

The Scot­tish gov­ern­ment has LBTT cal­cu­la­tors which work out the amount of LBTT payable. The cal­cu­la­tors can be found at www.revenue.scot/land-buildings-transaction-tax/tax-calculators.