Following the announcement of a “stamp duty holiday” in England, the Scottish Government confirmed that they would be raising the nil LBTT threshold from £145,000 to £250,000 on 15th July 2020.
In her budget announcement on 28th January, Kate Forbes MSP confirmed that the LBTT reduction would end as planned on 31st March 2021, meaning the zero tax threshold will drop from £250,000 back to £145,000. First time buyers will benefit from a nil tax threshold of £175,000, as they did prior to the 15th July 2020.
This change has been brought about to support the Scottish property market and property purchasers during the Coronavirus pandemic.
In this article, we answer commonly asked questions about LBTT and investigate what this change means for you.
What is LBTT?
Land and Building Transaction Tax (LBTT) is Scotland’s version of stamp duty. This property tax is applied to residential and commercial property purchases in Scotland.
How much is LBTT in Scotland?
The amount of LBTT paid on a residential property transaction depends on the property selling price. There are various LBTT bands, with a different percentage of tax applied to each band.
In July 2020, the Scottish Government raised the nil tax threshold from £145,000 to £250,000 for residential property transactions but all the percentages for the other bands remain the same. The table below shows how much LBTT is payable on residential property transactions for the different bands, both before and after 15th July 2020. LBTT bands will revert to what they were prior to 15th July 2020 after 31st March 2021 (with first time buyer relief up to £175,000). You can also use our LBTT calculator to find out how much you'll need to pay based on the property price.
| LBTT band | Transactions before 15th July 2020 | Transactions between 15th July 2020 and 31st March 2021 |
| Up to £145,000 | 0% | 0% |
| £145,000 - £250,000 | 2% | 0% |
| £250,001 - £325,000 | 5% | 5% |
| £325,001 - £750,000 | 10% | 10% |
| Over £750,000 | 12% | 12% |
How much could I save on LBTT by purchasing before 31st March 2021?
The new LBTT threshold means anyone purchasing a property under £250,000 won’t have to pay LBTT, unless it is a second home in which case the 4% Additional Dwelling Supplement applies.
If you are purchasing a property over £250,000, then you will only pay LBTT on the amount over £250,000. Raising the 0% threshold from £145,000 to £250,000 means people purchasing a property over £250,000 will save £2,100 on LBTT.
I’m in the process of purchasing a new property – will I benefit from the higher nil tax LBTT threshold?
The Scottish Government has confirmed that any transaction with an “effective date” between the 15th July 2020 and 31st March 2021 (inclusive) will be eligible for the new LBTT rates. For most residential property transactions, the “effective date” is the date of settlement or entry (when the buyer pays the purchase price to the seller and the seller give the keys and legal ownership to the buyer).
We advise you to speak to your solicitor about your transaction to see if you will be eligible for the higher £250,000 zero tax threshold.
I’m a first time buyer – how does the change in LBTT affect me?
Prior to the 15th July 2020, first time buyers benefited from 0% LBTT up to £175,000 as opposed to £145,000. This meant they could save an additional £600 compared to other buyers
With the LBTT holiday currently in place, first time buyers (along with all other buyers) benefit from a higher nil tax threshold than £250,000. This meant first time buyers can still save up to an extra £1,500 on LBTT on property purchases.
Kate Forbes MSP has confirmed that the LBTT reduction will come to an end on 31st March 2021 as planned. After this date, first time buyers will still benefit from a zero tax threshold of £175,000 instead of £145,000, saving them up to £600 on property purchases.
What about the Additional Dwelling Supplement?
The Additional Dwelling Supplement (ADS) is a 4% surcharge which applies to second home purchases. This charge still applies on transactions between 15th July 2020 and 31st March 2021.
This means if you are purchasing a residential property and already own a home, you will benefit from 0% LBTT up to £250,000 but will still be required to pay the 4% ADS charge.
If you are planning to sell your original property, you can claim the ADS amount back provided you sell within 18 months.
