Land and Building Transaction Tax explained

The Land and Building Transaction Tax (LBTT) came into force in April 2015 and replaced Stamp Duty Land Tax (SDLT).

LBTT applies to all residential property purchases in Scotland and is a tax that must be paid by the buyer.

LBTT levies tax on slices of the total property price on a progressive basis. Properties purchased for less than £145,000 are taken out of the tax regime altogether.

Previously, buying a property for £150,000 would have attracted Stamp Duty tax of £1,500. Under the new LBTT rates, there is just £300 to pay, a significant saving of £1,200. Anyone buying a property up to roughly £325,000 will also enjoy a tax saving compared to the previous Stamp Duty regime.

Transactions over £325,000 will see an increase in tax payable. For example, a purchase of £500,000 would have attracted Stamp Duty tax of £15,000. The same transaction will now cost £27,300 under the Land and Building Transaction Tax regime.

Properties valued at £1,000,000 will attract a charge of £77,300 LBTT compared with £40,000 Stamp Duty that would have been levied before April 2015.

With high value properties, there is a steep increase in the amount of LBTT payable, which in some cases may encourage the parties involved to enter into some negotiation on how the pain is to be shared.

Otherwise, the introduction of LBTT is good news for first time buyers and those on a limited budget.

You can get more information about the Land and Building Transaction Tax on the Revenue Scotland website where you can also find an online calculator to estimate your LBTT tax liability.