Scottish Budget property tax changes

The 2019/20 Scottish Draft Budget includes changes to Scottish Land and Buildings Transaction Tax (LBTT).

The policy priority for residential Land and Buildings Transaction Tax (LBTT) continues to be to help first-time buyers and those moving through the property market.

The policy has helped over 80% of taxpayers to pay less LBTT than in England – or none at all.

The current rates and bands are as follows.

The rates apply to the portion of the total value which falls within each band.

First-time buyers’ relief

Relief is available for first-time buyers of properties costing up to £175,000. The relief increases the zero-tax threshold from £145,000 to £175,000. First-time buyers purchasing a property which is more than £175,000 will also benefit, and the relief will be apportioned only to the price below the threshold.

Higher rates of Land and Buildings Transaction Tax

Certain residential properties, such as buy-to-let and second homes, incur higher rates of LBTT.

From the 25 January 2019, the Additional Dwelling Supplement (ADS) increased from 3% to 4% and will apply to transactions which occurred before the 12 December 2018. ADS is applicable where an individual owns, or partially owns, a property, or purchases another which is not replacing a main residence. There is an eighteen-month rule which will prevent some purchases incurring the additional rates.

Non-residential rates and bands

The Government has reduced the non-residential LBTT rates from 3% to 1%, and increased the upper rate from 4.5% to 5%, with the starting threshold reduced to £250,000 from £350,000.

These changes will not apply where a transaction was started before the 12 December 2018.

The revised rates and bands for non-residential LBTT transactions are as follows.