In Scotland, property buyers face a different tax system compared to the rest of the UK. Instead of the traditional Stamp Duty, Scotland has its own Land and Buildings Transaction Tax (LBTT). Introduced in April 2015, LBTT applies to the purchase of residential and non-residential properties in Scotland, and it functions quite differently from the Stamp Duty system in England and Wales.
How LBTT works
LBTT is a progressive tax, meaning that the more expensive the property, the higher the rate of tax you pay. It is calculated based on the purchase price of the property, with different bands for different price ranges. For example, lower-value properties pay a smaller percentage of LBTT, while higher-value properties incur a higher rate.
Here are the current LBTT rates for residential property purchases in Scotland (as of 2025):
- Up to £145,000: 0% (no LBTT)
- £325,001 to £750,000: 10%
For example, if you purchase a property for £200,000, you would pay 2% on the amount above £145,000. That means the LBTT on a £200,000 property would be £1,100 (2% of £55,000).
LBTT vs. Stamp Duty
The main difference between LBTT and the Stamp Duty system used in England and Wales is the way the tax bands are structured. While both are progressive, the LBTT system has lower thresholds for higher tax bands. In England, Stamp Duty starts at 0% up to £250,000 for residential properties, while in Scotland, LBTT starts at 0% but only applies up to £145,000.
Additionally, Scotland has a 12% LBTT rate on properties over £750,000, whereas in England, Stamp Duty for properties over £1.5 million is set at 12%. This means that Scotland’s LBTT system can result in lower taxes for higher-value properties than those in England, but this depends on the specific value of the property.
Additional considerations
- Second homes and buy-to-let properties: If you're buying a second home or a buy-to-let property in Scotland, an additional surcharge is applied. This is typically 4% of the entire purchase price, similar to the Additional Rate of Stamp Duty in England.
- First-time buyers: In Scotland, first-time buyers can benefit from LBTT relief. If the purchase price is below £175,000, no LBTT is due at all. This is an important advantage for first-time buyers in Scotland, making homeownership more affordable for those entering the property market for the first time.
When to pay LBTT
LBTT must be paid within 30 days of the property purchase completion. Your solicitor will typically handle the submission and payment of LBTT on your behalf, ensuring that all paperwork is filed correctly.
Why it matters
Understanding LBTT is essential when buying property in Scotland. The tax can have a significant impact on your overall costs, particularly for higher-value properties. By knowing the tax bands and rates, you can better plan for the costs associated with purchasing property and avoid any surprises.
Contact us to discuss your property purchase and LBTT obligations in Scotland
