What is Land & Buildings Transaction Tax?
Land & Buildings Transaction Tax (LBTT to many) is a property tax paid by buyers of property in Scotland. It’s the Scottish property tax that replaced Stamp Duty some years ago.
So, what’s changed?
The Scottish Government has announced that the threshold after which you pay the LBTT has been raised from £145,000 (£175,000 for first-time buyers) to £250,000. The change came into effect on 15th July and will last until 31st March 2021.
The coronavirus lockdown brought the property market in Scotland to almost a complete standstill. This change in the property tax threshold is designed to support the Scottish property market.
The increase in the LBTT threshold also helps those who buy for more than £250,000 so this is a win/win for all property buyers. If you buy for more than £250,000, you’ll save £2,100!
How is LBTT calculated?
LBTT is calculated on a sliding scale depending on the price of the property you’re buying. It’s based on a percentage of the value of the property and the more expensive the property you buy, the higher the tax.
The current and previous LBTT bands are as follows:
| LBTT Band |
Current Charge |
After 31 March 2021 |
| Up to £145,000* |
0% |
0% |
| £145,000 – £250,000* |
0% |
2% |
| £250,000 – £325,000 |
5% |
5% |
| £325,000 – £750,000 |
10% |
10% |
| Over £750,000 |
12% |
12% |
*If you’re a first-time purchaser, you don’t pay any LBTT up to £175,000 and after 31 March 2021 you’ll pay 2% on the difference between £175,000 and £250,000
LBTT is a “progressive” tax. This means that you pay the percentage for each band up to the price of the property. For example, if you’re buying a property right now for £350,000, here’s how the LBTT works out:
| LBTT Band |
LBTT Rate |
Amount Payable |
| £0 – £250,000 |
0% |
£0.00 |
| £250,000 – £325,000 |
5% |
£3,750.00 |
| £325,000 – £350,000 |
10% |
£2,500.00 |
|
Total |
£6,350.00 |
If you wait till after 31 March 2021 to make the same purchase for £350,000, here’s how the LBTT will look:
| LBTT Band |
LBTT Rate |
Amount Payable |
| £0 – £145,000 |
0% |
£0.00 |
| £145,000 – £250,000 |
2% |
£2,100.00 |
| £250,000 – £325,000 |
5% |
£3,750.00 |
| £325,000 – £350,000 |
10% |
£2,500.00 |
|
Total |
£8,450.00 |
I’m a first-time buyer, how does this affect me?
First-time buyers also enjoy the current concession of not having to pay LBTT for any purchase up to £250,000.
When things return to normal after 31 March 2021, first-time buyers will only start paying LBTT if the price is more than £175,000. This means first-time buyers save £600 in LBTT over home movers.
Is there anything else I should know about LBTT?
Yes. There’s something called the Additional Dwelling Supplement (ADS). The ADS is charged on any second or subsequent home you buy and you might end up paying this if you don’t manage to sell your present home before buying a new home.
It’s charged at a flat rate of 4% on the purchase price. You also have to pay this in addition to any LBTT you might have to pay.
If you have to pay the ADS because you can’t sell your present home, you have up to 18 months to reclaim the ADS once you finally sell your present home.
If this all sounds too complicated to work out, thankfully, Revenue Scotland has a calculator that works out the numbers for you. You can click here to go there and have it work out the LBTT you’ll have to pay on your new house.
What if I have any questions about LBTT or ADS?
Get in touch with us. Call our Dunfermline office on 01383 620222 (email info@morganlaw.co.uk) or our Kinross office on 01577 863424 (email kinross@morganlaw.co.uk)
