Correct as of the 1st of April 2024
LBTT – Land and Building Transaction Tax - is the Scottish equivalent of Stamp Duty Land Tax (SDLT). LBTT is a tax applied to residential and commercial land and buildings transactions, however I will be focusing exclusively on residential transactions.
The rates of LBTT are dependent upon the value of the purchase, which are as follows:
Below £145,000 – rate of 0% Above £145,000 to £250,000 – rate of 2% Above £250,000 to £325,000 – rate of 5% Above £325,000 to £750,000 – rate of 10% Over £750,000 – rate of 12%
First-Time Buyer (FTB) Relief
Relief for first-time buyers of properties is available for properties up to the value of £175,000. First-time buyers purchasing a property above £175,000 also benefit from the relief on the portion of the price below the threshold. Therefore, if you purchase at £180,000 with FTB relief you would be charged for £700 of LBTT and receive £600 of FTB relief, so in the end you would only need to pay £100 of LBTT.
Additional Dwelling Supplement (ADS) is a higher rate of LBTT charged on purchases of additional residential properties, such as buy to let properties and second homes. ADS is charged at 6% of the purchase price of the property. ADS applies if, at the end of the day of the purchase transaction, the individual owns two or more residential properties anywhere in the world and has not replaced their main residence. ADS also applies if there are two or more buyers, and one buyer already owns one or more residential properties anywhere in the world. ADS is not applicable if you are replacing or selling your 'only or main' residence
If the second residential property is sold or becomes your main residence within 36-months of purchase, an ADS refund can be claimed if you have lived in the property you paid the ADS on as your only or main residence.
In separation or divorce there may be circumstances where one of the couple remains in what was the main residence but the other does not. The individual who has moved out but still has their name on the property title of the former main residence, may be entitled to ADS relief. This would apply provided there is a court order, minute of agreement or a separation agreement stating that the individual who has moved out must retain an interest in the former main residence. That means when the individual who has moved out buys their own new main residence, it will not be subject to ADS.
ADS and Inherited Properties
If the buyer inherits a property after they have entered into the contract to purchase a new main residence but before the date of entry, the inherited property will not count towards the number of properties owned for the purposes of the ADS. However, this is an extremely tight window so must be handled carefully, particularly if the date of entry is delayed.
ADS and Small Shares in A Property
If you own a small share in a property, you are exempt from the two-property ADS rule. A small share of a property means that if your share in the ownership of a property is worth less than £40,000, you will not have to pay ADS on another property you buy.
Whether you are a first-time buyer, purchasing additional residential properties, going through a divorce, or dealing with inherited properties, knowing the implications of LBTT and ADS is essential for making informed decisions. We understand that it can be a complex and emotional experience. At MSHB, we have a team of caring and specialised property lawyers who are here to support you through every step of the process. We invite you to contact us now to discuss your requirements on 0141 221 1919
