Welcome to this month's HSPC blog where we catch up with our solicitor firms to give you valuable information and advice for everything property in the Highlands.

This month, Bernadette Walker from HSPC explains 'The Land and Buildings Transaction Tax' in Scotland.

LBTT Explained

The Land and Buildings Transaction Tax (LBTT) is an important consideration to property buying in Scotland, serving as the equivalent of stamp duty north of the border and was introduced in 2015 as part of Scotland's devolved taxation powers.

LBTT is a tax that buyers in Scotland are required to pay when purchasing a property, and it varies depending on the purchase price of the property. Unlike the UK Stamp Duty Land Tax (SDLT), which applies to the entire purchase price, LBTT operates on a tiered system. This means that buyers in Scotland pay different rates of tax on portions of the purchase price within specified
bands.

Here's an overview of the LBTT bands and rates (as of October 2023):

• 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%

First- Time Buyers enjoy a more favourable LBTT rate, with a tax relief that completely exempts them from paying LBTT on properties valued up to £175,000. This relief is designed to make homeownership more accessible for those taking their first steps onto the property ladder. If you already own a property and are looking to buy another, you will have to factor Additional Dwelling Tax (ADS) onto your final figure as second (or more) homeowners are subject to an increased fee. This includes a second property, rental property, holiday home or property used by families and friends even if you don’t charge rent. The current ADS fee is 6% of the property price of any property bought over £40,000. If the second property replaces your only and main residence within 18 months, you can claim back the ADS fee.

It's essential for property buyers in Scotland to factor in LBTT when budgeting for a property purchase, as it can significantly affect the overall cost. Additionally, understanding the LBTT bands and rates is essential for making informed decisions during the property buying process.

Overall, the Land and Buildings Transaction Tax (LBTT) is a vital element of the Scottish property market, influencing property prices, buyer decisions, and government revenue. Staying informed
about LBTT regulations and changes is crucial for anyone involved in property transactions in Scotland.
Want help with LBTT on a property purchase?
Call us today for property guidance.