What is Land and Buildings Transaction Tax
Land and Buildings Transaction Tax (LBTT) is the tax applied to purchases of land or property in Scotland. It became a devolved tax in Scotland in April 2015, replacing UK Stamp Duty.
What does this mean as a Purchaser?
When purchasing land or property in Scotland, you may be subject to LBTT. The threshold for paying LBTT is £145,000, although if you are a first-time buyer then you will not pay LBTT on anything under £175,000, saving up to £600.
The introduction of LBTT changed Land Tax in Scotland to a progressive tax system, similar to the way income is taxed. The thresholds of LBTT liability are illustrated below, assuming you are not a first-time buyer. If in any doubt, the Revenue Scotland website has an online calculator which can do the maths for you (https://revenue.scot/calculate-tax/calculate-property-transactions).
| Purchase price | LBTT rate |
| Up to £145,000 | 0% |
| £145,001 to £250,000 | 2% |
| £250,001 to £325,000 | 5% |
| £325,001 to £750,000 | 10% |
| Over £750,000 | 12% |
These thresholds are subject to change depending on what the Scottish Budget determines. Currently, these rates will remain unchanged in 2022-23.
What if I already own a Property
The Additional Dwelling Supplement (ADS) was introduced to Scotland in April 2016, originally at 3% of the purchase price and subsequently raised to 4%. This applies to any purchase over £40,000 and will be charged at 4% of the whole purchase price, on top of any LBTT that may be payable.
If you are paying ADS on your new principal residence, this can be reclaimed if you go on to sell your current main residence within 18 months of the purchase date.
I am a First Time Buyer about to buy a home with my partner who is retaining their flat – what is our LBTT/ADS liability?
When purchasing a property in joint names, the rules around LBTT essentially treat two or more joint-purchasers as one single “economic unit”. This means that if either party has owned or part-owned a property before (purchased, inherited, or otherwise), then the First-time Buyer’s Relief will not apply.
Likewise, ADS will apply on top of LBTT if either of the parties already owns another property at the date of the new purchase. In order to reclaim that ADS the other property would need to have been your principal residence within the 18 months prior to the purchase of your new home and be sold within the 18 months following the purchase.
If purchasing in a sole name as a first-time buyer or as someone not currently owning a property, but your partner owns property, then ADS will still apply if you are married, in a civil partnership or deemed to be cohabiting with your partner. In such instances, the rules around ADS treat the buyer and the partner as a single “economic unit”.
I am purchasing a property through a company – will I pay ADS?
The short answer is yes. ADS will apply on top of LBTT for all purchases of residential properties by limited companies, whether that company already owns property or not.
Despite being in place for a number of years, there are still instances arising where LBTT and ADS liability may not be immediately clear. At Gibson Kerr we will advise our clients on their potential LBTT and ADS liability, as well as walking them through the whole purchase process from offer to completion. Please contact our Property Department for further information on 0131 226 9167 or property@gibsonkerr.co.uk.
DISCLAIMER
The content of this page is for information only. It is not intended to be construed as legal advice and should not be treated as a substitute for specific advice. Gibson Kerr Ltd accepts no responsibility for the content of any third party website to which this webpage refers. Gibson Kerr Ltd is regulated by the Law Society of Scotland.
