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Land and Building Transaction Tax

As of 1st April 2015, The Scottish Government introduced a new tax system for residential property sales, called Land and Buildings Transaction Tax (LBTT).

This system replaced the previous Stamp Duty Land Tax (SDLT), and affects all sales over £145,000.

Additionally, as of the 1st April 2016, a supplementary surcharge of 3% was applied to second homes and buy-to-let properties.

So if you are thinking of buying or selling, how do these property taxes affect you? Our guide below will give you all the facts you need to know, but if you’d like advice on how this will impact your individual situation, get in touch with your nearest team of specialists for a free, no-obligation chat.

Land and Buildings Transaction Tax Banding (LBTT)

The Land and Buildings Transaction Tax is a scaling property tax and each band within the scale is taxed at an increasing rate. 

The rate applied in each band is only applied to the part of the price over the previous threshold, and up to the next.

The Additional Dwellings Supplement (ADS)

This supplementary 3% charge is applied when a purchaser already owns more or more residential properties, either in the UK or overseas. This applies to individuals, companies, partnerships and sole traders.

If you are buying a property with the intention of making it your home (or main residence) but haven't yet sold your previous home, you will still have to pay the ADS, but will be entitled to a rebate provided you sell the original property within 18 months. Find out more information about when the ADS supplement applies here.

How These Taxes Are Applied

Sale Value LBTT               ADS
Below £40,000 0% 0%
£40,000.01 - £145,000             0% 3%
£145,000.01 - £250,000 2% 3%
£250,000.01 - £325,000 5% 3%
£325,000.01 - £750,000 10% 3%
£750,000.01 and above 12% 3%

Examples

If you were to purchase a house at £550,000 and you owned no other property valued above £40,000, the tax you would pay would be calculated as:

LBTT Cost
The first £145,000                   Charged at 0% £0
 £145,000.01 - £250,000   Charged at 2% £2,100
£250,000.01 - £325,000 Charged at 5% £3,750
£325,000.01 - £550,000  Charged at 10% £22,500
TOTAL       £28,350

If you were to purchase the same house, but already owned other properties valued at over £40,000, your tax bill would be calculated as:

 

LBTT      ADS Cost
£0 - £145,000 0% 3% £4,350
145,000.01 - £250,000   2% 3% £5,250
£250,000.01 - £325,000   5% 3% £6,000
£325,000.01 - £550,000  10% 3% £29,250
TOTAL       £44,850

To calculate the exact rate of LBTT and ADS you may incur on an individual property purchase, use the Government's Tax Calculator or for more information, get in touch

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