Everything you need to know about LBTT before the Scottish Budget
01 December 2022
Land and Buildings Transaction Tax (LBTT) is money that must be paid when buying a property above a certain value in Scotland.
It isn't the same as stamp duty, which homebuyers have to pay in England and Northern Ireland, and there are some important differences that you need to know about.
What has happened in England and Northern Ireland?
In the mini-Budget on 23 September, former Chancellor Kwasi Kwarteng didn’t lower stamp duty rates but the thresholds where stamp duty kicks in were changed to start at transactions of £250,000 (double the previous limit of £125,000) and the exemption for first-time buyers will rise from £300,000 to £425,000.
In the Autumn Budget Statement on 17 November, Chancellor Jeremy Hunt announced that the stamp duty thresholds would reduce to previous limits from 31 March 2025.
What does this mean for property tax payments in Scotland?
Since LBTT is set by the Scottish Parliament, the changes in England and Northern Ireland don’t affect Scotland.
The Scottish Budget will be announced on 15 December, and we've been advised that any decisions in respect to amendments to the rates or bands for LBTT would be taken as part of this budget.
This means that at present there is a real disparity in the property tax between those purchasers north and south of the border.
Want to know more about LBTT? We explain in detail below.
What is LBTT?
Land and Buildings Transaction Tax (LBTT) is Scotland’s version of stamp duty. This property tax is applied to residential and commercial property purchases in Scotland.
How much is LBTT in Scotland?
The amount of LBTT paid on a residential property transaction depends on the property purchase price. There are various LBTT bands, with a different percentage of tax applied to each band.
The current rates and bands are set out in the table below.
|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%|
First-time buyers pay a little less LBTT
A relief for first-time buyers is available, which means that those buying their first home have a zero tax threshold of £175,000 instead of £145,000.
The relief means a reduction in tax payable of up to £600 for qualifying first-time buyers.
Calculating your potential LBTT payment
Use our TSPC LBTT Calculator to work out how much you could be tax you could be paying.
What about the Additional Dwelling Supplement?
The Additional Dwelling Supplement (ADS) is an additional 4% surcharge which applies to most second home purchases in additional to the LBTT payment.
This means if you are buying a residential property and you already own a home, you will need to pay the 4% ADS charge.
If you are planning to sell your original property, you can claim the ADS amount back provided you sell within 18 months.
What will happen to LBTT in the Scottish Budget?
We wait to see if there will be changes announced to LBTT as part of the Scottish Budget in December.
We spoke with Tom Arthur, the Minister for Public Finance, earlier this year who advised that the Scottish Government is monitoring the housing market to ensure that any prospective decisions are taken on the basis of the current data and evidence to hand.