If you’re buying a home in Scotland costing more than £145,000, you’ll have to pay Land and Buildings Transaction Tax (LBTT) on your purchase. Use this guide to find out about how LBTT works, how much you’ll pay, LBTT on second homes and how it is paid.
What is Land and Buildings Transaction Tax?
In Scotland, you’re liable to pay Land and Buildings Transaction Tax (LBTT) when you buy a residential property, or piece of land costing more than £145,000 (or more than £40,000 for second homes).
This tax applies to both freehold and leasehold properties – whether you’re buying outright or with a mortgage.
How much is Land and Buildings Transaction Tax?
There are several rate bands for Land and Buildings Transaction Tax (LBTT).
The tax is calculated on the part of the property purchase price falling within each band.
For example, if you buy 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 remaining £30,000 = £1,500
Total LBTT = £3,600
Land and Buildings Transaction Tax (LBTT) rates
|Minimum property purchase price
||Maximum property purchase price
||Stamp Duty rate (only applies to the part of the property price falling within each band)
Land and Buildings Transaction Tax on second homes
Buyers of additional residential properties, such as second homes and buy-to-let properties, will have to pay an extra 4% in Land and Buildings Transaction Tax (LBTT) on top of current rates for each band on properties costing more than £40,000.
Land and Buildings Transaction Tax for first-time buyers
You can get first-time buyer relief if you buy a property which you intend to live in as your only or main residence.
You’ll be able to claim the relief at the point when you submit your LBTT return.
A first-time buyer will need to meet certain criteria to qualify for the tax relief. You can find the full criteria on the Revenue Scotland websiteopens in new window.
If you qualify for the relief, you’ll be eligible for zero LBTT for properties up 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:
||Tax due - with relief
||Tax due - without relief
When do you have to pay Land and Buildings Transaction Tax?
You’ll need to submit a Land and Buildings Transaction Tax (LBTT) return to Revenue Scotland.
If you fail to submit a LBTT return, Revenue Scotland might charge you penalties and interest.
When is Land and Buildings Transaction Tax not payable?
You may avoid Land and Buildings Transaction Tax (LBTT) if you buy a property as your main residence for less than £180,000.
But for many homebuyers this just isn’t possible.
There are other circumstances in which LBTT is either not payable or can be reduced:
Slightly over rate band: If the price is only just within a higher band, ask the seller or estate agent if they would accept a slightly lower price.
Transfer of property in separation or divorce: If you’re divorcing or separating from your spouse or partner as part of an agreement or court order, there’s no LBTT to pay if you transfer a proportion of your home’s value to them. If joint owners are unmarried and not in a civil partnership when they transfer an interest in land or property from one joint owner to another then you may have to pay SDLT.
Transfer of deeds: If you get land or property under the terms of a will, there’s no need to tell Revenue Scotland and you won’t pay Land Transaction Tax. This applies even if you take on an outstanding mortgage on the property on the date the person died. This is on condition that no other consideration is given.
If you get property as a gift you won’t pay Land Transaction Tax as long as there’s no outstanding mortgage on it. But if you take over some or all of an existing mortgage, you’ll pay Land Transaction Tax if the value of the mortgage is over the Land Transaction Tax.
However, if you exchange properties with another person, you will each have to pay LTT on the property you receive based on its market value.
How to pay Land and Buildings Transaction Tax
Usually your solicitor will deal with the Land and Buildings Transaction Tax (LBTT) return, although you can do it yourself.
Either way, you’re responsible for making sure it’s all submitted on time.
If the price of your new home is under £145,000, you must still submit a return (unless exempt) even though you won’t need to pay any LBTT.
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