Whether you’re looking to relocate, upsize or downsize, there is a lot to factor into your budget when moving home. For Scottish home buyers, one of the most important things is the Land and Buildings Transaction Tax (LBTT) – but what exactly is it, who needs to pay, and how much is it?

What is LBTT?

LBTT is tax that you pay to the Scottish Government when buying a new home or any land in Scotland. You normally pay it on properties that cost over £145,000 and the amount that you pay is a percentage based on the purchase price of your new home.

Without this payment you won’t receive your certificate from Revenue Scotland to record the change in ownership of the property and legally register it.  

First time buyers will normally get relief on their LBTT, but for those who are looking to buy a second property, you will have to pay an Additional Dwelling Supplement.

LBTT replaced the Stamp Duty Land Tax (SDLT), which previously applied across the UK, in April 2015. Stamp duty now only applies to purchasing new properties in England and Northern Ireland with a purchase price of over £250,000.

To find out more about stamp duty, click here. 

Do you pay LBTT on a new build?

LBTT is paid on all residential properties, including new builds, that cost more than £145,000. The amount you pay however, depends on the property price and when you purchase it. The Government may increase the rate or introduce a new relief scheme, so it’s important to do your research because it may only apply for a specific time period.

Revenue Scotland has described residential buildings as:

• A used property or those suitable to use as a home
• Homes in the process of being built
• Buildings that are adapted to use as a home

If you're a first time buyer, you will be eligible for a discount, or if the home has been transferred to you as a result of a divorce, you will be exempt from paying.

How much is LBTT?

LBTT is an upfront cost that you make after you purchase your new home. The amount you pay depends on the purchase price, but generally – the higher the property price, the more LBTT you pay.

The standard LBTT rate is:

Chargeable consideration is important to take into account. For example, if you’re purchasing a new home, the first £145,000 will be free from any LBTT, but any amount after this will be charged at the rate of the purchase price. So, if your property price is £150,000, you will have to pay LBTT on the remaining £5,000 at a rate of 2%.

You can use ourfree LBTT calculator to work out the cost of your tax.

LBTT as a first time buyer

For first time buyers, the Scottish Government has introduced tax relief on LBTT, which means you only pay LBTT if a property is priced over £175,000. This equates to relief of £600, which can be claimed provided your new home will be your main residence.

Additional Dwelling Supplement

If you’re thinking about buying a second home to rent out or use as a holiday home, keep in mind that you may have to pay an Additional Dwelling Supplement (ADS). From December 2022, the rate increased to 6% and it’s paid as an extra cost on top of the standard LBTT rate.

The LBTT rate for an Additional Dwelling Supplement is:

How to pay LBTT?

Usually your solicitor or conveyancer will handle the process for you, but you can also do it yourself. If your property is below £40,000, you don’t need to submit an LBTT return.

To pay your LBTT, you need to submit a return and you then have 30 days to make the payment. It’s vital that you pay as soon as you can to avoid any penalties or interest.

Unlike stamp duty in England, if you’re below the LBTT threshold of £145,000, you may still have to submit a return even if you don’t need to make a payment. But don’t worry about this, because you will just need to include information like the purchase price, your personal details, the date of transaction, whether any relief applies and a calculation of how much LBTT you owe.

Before going ahead with your new build purchase, start with a clear idea of your budget and be aware of additional costs like LBTT. You can use our free calculator to work out your LBTT and if you need any extra support or guidance, don't hesitate to get in touch. We could even offer incentives to contribute to the LBTT due.

To view our new build homes in Scotland and around the UK, or find out more information, click here.