Land and Buildings Transaction Tax (LBTT) is Scotland’s property transaction tax. It replaced Stamp Duty Land Tax (SDLT) in Scotland on 1 April 2015 under the Scotland Act 2012. LBTT is administered and collected by Revenue Scotland. Registers of Scotland (RoS) handles property registration and will not register a land transaction unless the LBTT return requirements have been met.
LBTT applies to acquisitions of land and property in Scotland across residential, non-residential, and certain lease transactions. It operates on progressive, marginal bands so tax is charged only on the slice of consideration within each band. Rates, thresholds and policy decisions are set by the Scottish Government and are reviewed through the Scottish Budget process; taxpayers should always verify the latest bands on Revenue Scotland before completing a transaction.
What this article is about
This guide explains how LBTT works in practice. It covers scope and liability, current rates and thresholds (including the Additional Dwelling Supplement), key reliefs and exemptions, lease rules, filing and payment deadlines, record-keeping, and Revenue Scotland’s compliance and penalty regime. It is written for buyers, tenants, companies and advisers who need a practical, accurate framework to manage LBTT from heads of terms through to completion and post-completion filings.
Section A: What is LBTT?
Land and Buildings Transaction Tax (LBTT) is a devolved tax payable on land and property transactions in Scotland. It applies when ownership is transferred or when a leasehold interest is created or assigned. It replaced Stamp Duty Land Tax (SDLT) in Scotland from April 2015, following tax powers devolved under the Scotland Act 2012.
LBTT is structured differently from SDLT. It uses a progressive, marginal band system, meaning tax is only charged on the portion of the price falling within each band. This avoids the “slab” effect of older stamp duty systems and ensures proportionate liabilities for buyers across different price points.
The types of transactions covered by LBTT include:
– **Residential property purchases:** Houses, flats and other dwellings, whether main homes, second properties or investments.
– **Non-residential property purchases:** Commercial property such as shops, offices, industrial units and agricultural land.
– **Mixed-use property:** Transactions with both residential and commercial elements, such as a shop with a flat above, are treated under the non-residential regime.
– **Leases:** Non-residential leases are subject to LBTT, with tax calculated on the net present value (NPV) of rent due over the lease term. Residential leases are generally exempt unless they exceed 20 years.
The liability to pay LBTT lies with the buyer or tenant, not the seller or landlord. An LBTT return must be filed with Revenue Scotland even where no tax is due, unless the transaction is exempt. Solicitors or conveyancers usually file on behalf of clients, but legal responsibility remains with the taxpayer.
Revenue Scotland administers and collects LBTT. Registers of Scotland supports compliance by requiring proof of return submission before registering land transactions.
**Section A Summary**
LBTT is Scotland’s replacement for SDLT, applying to residential, non-residential and lease transactions. It operates on a marginal rate basis, with liability resting on the buyer or tenant. Revenue Scotland administers and enforces compliance, supported by Registers of Scotland at the registration stage.
Section B: LBTT Rates and Thresholds
LBTT operates on progressive tax bands. Tax is only charged on the portion of the price within each band, not the full consideration once a threshold is passed. This system ensures a fairer distribution of liability and avoids sudden jumps in liability.
Rates and thresholds are set by the Scottish Government and are reviewed annually in the Scottish Budget. Buyers and advisers should always check Revenue Scotland for the most up-to-date bands before completing a transaction.
1. Residential property rates
Residential LBTT applies to transactions involving houses, flats and other dwellings. First-time buyers may qualify for relief that extends the nil-rate threshold by £175,000, reducing overall liability.
The **Additional Dwelling Supplement (ADS)** is a separate surcharge. It is currently set at **6% of the total purchase price** (increased from 4% in April 2024) and applies when purchasing additional residential properties, such as second homes or buy-to-let investments. ADS is payable in addition to the core LBTT liability. Buyers replacing a main residence may still pay ADS if they own multiple properties on completion, but refunds can be claimed if the old residence is sold within 18 months.
2. Non-residential property rates
Non-residential property transactions cover commercial assets such as shops, offices, industrial premises and agricultural land. They are subject to their own rate bands, which differ from residential rates.
**Mixed-use property** (for example, a shop with a flat above) is treated wholly as non-residential and taxed using those bands.
3. Lease transactions
LBTT applies to non-residential leases on the basis of the **net present value (NPV)** of rent due over the term. The tenant must calculate liability using prescribed discounting rules.
Tenants must file an initial LBTT return at the start of the lease and further returns at every third anniversary, on assignation, or on early termination. These “three-yearly” returns ensure that changes such as rent reviews are reflected in LBTT liabilities.
Residential leases are generally exempt unless they exceed 20 years in duration.
**Section B Summary**
LBTT rates and thresholds apply differently across residential, non-residential and lease transactions. Residential purchases are subject to the Additional Dwelling Supplement, currently 6%, while mixed-use transactions fall under the non-residential regime. Leases are taxed on the NPV of rent with initial and ongoing filing obligations.
Section C: Reliefs and Exemptions
LBTT includes a number of reliefs and exemptions designed to prevent double taxation, encourage economic activity and reflect policy aims. Reliefs must be claimed in the LBTT return and supported by appropriate evidence.
1. Key LBTT reliefs
– **First-Time Buyer Relief:** Extends the nil-rate threshold by £175,000 for eligible first-time buyers purchasing a main residence. Conditions apply, including that the buyer must never have owned property worldwide.
– **Group Relief:** Allows property transfers between companies in the same corporate group without LBTT, provided anti-avoidance conditions are met.
– **Sub-sale Development Relief:** Prevents double taxation where a property is acquired and quickly resold as part of a development. Evidence of development intent is required.
– **Charities Relief:** Available when qualifying charities acquire property for charitable purposes, removing or reducing LBTT liability.
– **Other Reliefs:** Reliefs also exist for certain public bodies and corporate restructuring transactions.
2. Common exemptions
Some transactions do not trigger LBTT liability, including:
– **Low-value transactions** where consideration is below the lowest threshold.
– **Inheritance and gifts** where no chargeable consideration is paid.
– **Certain corporate reorganisations** where exemptions are provided in law.
3. Claiming reliefs correctly
Reliefs and exemptions must be claimed in the LBTT return submitted to Revenue Scotland. Supporting documentation, such as proof of group structures, charity status or development agreements, may be required.
Reliefs are generally only claimable within the statutory timeframe. Amended returns can usually be filed within **12 months of the original filing date** to correct missed reliefs. Failure to claim on time can result in permanently lost entitlement.
For cross-border issues, the location of land determines whether LBTT or SDLT applies.
**Section C Summary**
LBTT reliefs and exemptions include first-time buyer, group, sub-sale development and charities relief. Exemptions apply for low-value transactions, inheritance and gifts. Reliefs must be claimed in the LBTT return, supported by evidence, and usually within 12 months of the filing date.
Section D: LBTT Returns, Compliance and Penalties
LBTT compliance obligations extend beyond paying the tax. Buyers and tenants must file returns, keep records and pay liabilities on time. Revenue Scotland enforces compliance with penalties and interest where obligations are not met.
1. Filing requirements
An LBTT return must be submitted for most chargeable transactions, even if no tax is due. Returns are normally filed online through the Revenue Scotland portal.
– **Who must file:** The buyer or tenant is responsible, though solicitors often act as agents.
– **Deadline:** Returns and payment are due within **30 days** of the effective date, usually completion or entry.
– **Payment methods:** Bank transfer, cheque and other approved methods are accepted. Payment must clear within the deadline.
2. Compliance checks
Revenue Scotland reviews returns to ensure accuracy and may:
– Request contracts, lease documents or group structure charts.
– Cross-check submissions with Registers of Scotland.
– Investigate relief claims, especially where avoidance is suspected.
Taxpayers must keep adequate records for **five years** from filing to support their return.
3. Penalties and interest
Revenue Scotland imposes penalties and interest for late, inaccurate or unpaid returns. These can be **cumulative**, combining fixed, daily and tax-geared amounts.
– **Late filing penalties:** Apply from day 30 with escalating charges for continued delay.
– **Late payment penalties:** Charged if LBTT is not paid by the due date.
– **Interest:** Runs on unpaid tax from the due date until cleared.
– **Inaccurate returns:** Penalties apply where errors lead to underpayment, with the highest charges reserved for deliberate misstatements.
A **General Anti-Avoidance Rule (GAAR)** applies in Scotland, allowing Revenue Scotland to counteract tax advantages from artificial or abusive arrangements.
**Section D Summary**
LBTT compliance requires accurate filing, timely payment and record retention. Revenue Scotland enforces strict 30-day deadlines and penalties can accumulate quickly. Taxpayers should maintain clear records and ensure any relief claims are well supported.
FAQs
**What is the difference between LBTT and SDLT?**
LBTT applies in Scotland, SDLT applies in England and Northern Ireland, and Land Transaction Tax (LTT) applies in Wales. Each system has separate bands, reliefs and administration.
**Who pays the Additional Dwelling Supplement (ADS)?**
ADS, currently 6%, is payable on purchases of additional residential properties such as second homes and buy-to-lets. It applies even if the buyer owns property outside Scotland. Refunds may be available if the old main residence is sold within **18 months**.
**How does LBTT apply to company property purchases?**
Companies pay LBTT in the same way as individuals. For residential property, the Additional Dwelling Supplement applies in full. Non-residential and mixed-use acquisitions fall under the commercial bands.
**What happens if I don’t file an LBTT return on time?**
Revenue Scotland imposes fixed penalties for late returns, with additional daily and tax-geared penalties if delay continues. Interest and late payment penalties also apply.
**Can LBTT reliefs be reclaimed later if missed initially?**
Reliefs must generally be claimed in the original return. Amended returns can usually be made within **12 months** to correct missed claims. After that, entitlement may be lost.
Conclusion
Land and Buildings Transaction Tax (LBTT) is a core feature of property transactions in Scotland. It applies to residential, non-residential and leasehold dealings, with additional rules for mixed-use and supplementary charges through the Additional Dwelling Supplement.
Compliance demands accurate calculation, timely filing within 30 days and clear record-keeping for at least five years. Revenue Scotland enforces compliance firmly, with cumulative penalties and interest for late, inaccurate or unpaid returns.
By understanding rates, reliefs and exemptions, and by seeking professional advice where needed, buyers, tenants and companies can manage their LBTT obligations efficiently. Proactive compliance not only avoids penalties but also ensures that reliefs, such as first-time buyer and charities relief, are not overlooked.
Handled correctly, LBTT can be integrated smoothly into wider business and financial planning around Scottish property transactions.
Glossary
| LBTT (Land and Buildings Transaction Tax) | A devolved Scottish tax on land and property transactions, replacing SDLT in Scotland from April 2015. |
| ADS (Additional Dwelling Supplement) | A 6% surcharge payable on purchases of additional residential properties such as second homes and buy-to-lets. |
| Revenue Scotland | The authority responsible for administering and collecting LBTT, with compliance powers and enforcement duties. |
| Net Present Value (NPV) | The calculation method for LBTT on non-residential leases, based on the discounted value of rent due over the term. |
| Group Relief | An LBTT relief allowing property transfers between companies in the same group without LBTT liability, subject to conditions. |
| Charities Relief | A relief available where qualifying charities acquire property for charitable purposes, reducing or eliminating LBTT. |
Useful Links
| Revenue Scotland – LBTT rates and bands | Visit page |
| Revenue Scotland – LBTT reliefs and exemptions | Visit page |
| Revenue Scotland – Additional Dwelling Supplement (ADS) | Visit page |
| Revenue Scotland – LBTT returns and filing guidance | Visit page |
| GOV.UK – Stamp Duty vs devolved property taxes | Visit page |
Author
Gill Laing is a qualified Legal Researcher & Analyst with niche specialisms in Law, Tax, Human Resources, Immigration & Employment Law.
Gill is a Multiple Business Owner and the Managing Director of Prof Services Limited - a Marketing & Content Agency for the Professional Services Sector.
