What is LBTT, when is LBBT paid and how much will I pay?
LBTT replaced UK Stamp Duty Land Tax in Scotland on 1 April, 2015. When buying a home, second property or buy-to-let investment in Scotland over a certain price, Land and Buildings Transaction Tax ( LBBT) – the Scottish equivalent to stamp duty in England & Wales - tax is payable to Scottish Revenue 30 days from the date of completion or you may risk a fine. Your solicitor or legal adviser should take care of this for you and ensure you don't miss the deadline.
As LBBT is a tiered threshold system based on different tax rates paid on different portions of the property price, how much you will pay will depend on the purchase price (above £145,000) of the property and whether this is your first-time home, principal dwelling or second property/buy-to-let.
LBTT tax thresholds in Scotland 2019/2020
| Brackets | Rate |
|---|
| £0-£145,000 |
0% |
| £145,001-£250k |
2% |
| £250,001-£325k |
5% |
| £325,001-£750k |
10% |
| £750,001+ |
12% |
Calculating how much LBBT you need to pay
Example:
£850,000 - £750,000 = £100,000 x 0.12 = £12,000
£750,000 - £325,000 x 0.1 = £42,500
£325,000 - £250,000 x 0.05 = £3,750
£250,000 - £145,000 x 0.02 = £2,100
Total Amount = £60,350
As the property price increases the rate of pay increases within a certain tax bracket with percentages rising when a higher price threshold is reached.
LBTT for first-time buyers in Scotland
From June 2018, the tax-free limit for properties bought by first-time buyers is £175,000. Those buying a property for more than £175,000 will receive relief on the portion of the price below the threshold and benefit from savings of up to £600.
Buy-to-let and second homes LBTT
Effective 25 January 2019, the rate of the Additional Dwelling Supplement (ADS) rose from 3% to 4% on purchases of second residential dwellings in Scotland over £40,000. To discuss which areas in Scotland will provide the highest returns on investments in the future, please speak to one of our property experts who can offer advice on where and when to invest.
LBTT tax bands in Scotland for second homes in 2019/2020
| Buy-to-let and second home LBTT tax bands | Buy-to-let/second home rate ( 2019) |
|---|
| £40,001 - £145k |
4% |
| £145,001 - £250k |
6% |
| £250,001 - £325k |
9% |
| £325,001 -£750k |
14% |
| £750,001+ |
16% |
Can I reduce LBTT?
As Land and Buildings Transaction Tax is only payable on the land purchase, removable fixtures and fittings, or chattels, such as freestanding wardrobes, sofas, fridges, carpets and curtains, are not subject to SDLT and can, therefore, be subtracted from from the total property price. Everything 'attached' to property such as light switches technically form part of the property and are subject to LBTT.
If a seller is willing to leave certain chattels, you should agree to pay a reasonable amount between yourself and the vendor and subtract it from the agreed purchase price. This can be executed by a good tax lawyer or conveyancer.
Who pays LBTT?
Land and Buildings Transaction Tax is paid by everyone purchasing a residential or non-residential property in Scotland, including overseas buyers.
Get personalised mortgage advice
Knight Frank Finance LLP is dedicated to negotiating the most attractive mortgage finance terms for clients from its established network of lenders, often securing terms unavailable elsewhere. Should you have any questions, one of their mortgage experts will be able to help you at every stage of the property financing process.
Our offices in Scotland
Knight Frank Ediburgh