/ Mortgages

Land and buildings transaction tax: What you need to know

When you buy a home in Scotland you will have to pay the land and buildings transaction tax. This is the same as the stamp duty in England and the land transactions tax in Wales.

What is the land and buildings transaction tax?

The land and buildings transaction tax is the tax paid by the buyer on property sales over £145,000 in Scotland and for second homes costig over £40,000. This is a ax on both freehold and leasehold properties not taking into account whether you buy with a mortgage or you buy the property outright. You will need to pay the land and buildings transaction tax shortly after you have completed your home purchase to avoid any penalties.You will still need to submit a return even if you have n land and buildings tax to pay.

You can find out how to pay the land and buildings transaction tax here.

You can use a land and buildings tax calculator to estimate how much you may be likely to pay.

How does the land and buildings transaction tax work?

The land and buildings transaction tax has different tax bands which are based on the property price.

The land and buildings transaction tax only applied to the portion of the property price in the tax band.

Purchase price Land and buildings transaction tax due
Up to £145,000 0%
£145,001- £250,000 2%
£250,001 -£325,000 5%
£325,001 - £750,000 10%
£750,000 + 12%

Example:

You buy a house worth £300,000.

The Land and buildings transaction tax you owe is calculated as follows:

0% on the first £145,000
2% on the next £105,000= £1,050
And 5% on the remaining £50,000 =£2,500

Land and Buildings transaction tax on second homes

For second hoes you pay 3% on top of the existing band rate for any properties costing over £40,000. You can get more information on this here.

Land and Buildings transaction tax relief for first time buyers

Unlike Wales there is a first time buyer relief if you are buying a property which is going to be your main residence. You need to be eligible for the relief and you can find out the eligibility requirement on the revenue scotland’s website.

You can only claim the land and buildings transaction tax relief at the point when your solicitor submits your return

If you are eligible for the first-time buyer land and buildings tax relief then you will pay 0% land and buildings transaction tax on properties costing up to £175,000. This means you will not pay any tax on the property for the first £175,000 in comparison with the standard threshold of £145,000.

Example:

Purchase price tax due with relief Tax due without relief
£150,000 £0 £100
£175,000 £0 £600
£200,000 £0 £1,100
£250,000 £1,500 £2,100

When you shouldn't pay the land and buildings transaction tax

  • If you get property as a gift then no land transaction tax is due

  • If you get property through a will then no land transaction tax is due except you take on a mortgage as well and the mortgage is more than the land transaction tax which will normally have been due.

  • If your first home is less than £180,000 then land and buildings transaction tax will not be due

  • If the property price is just a few hundred pounds into another tax band, then ask the seller if they will accept a lower price

  • If you are transferring the property as part of a divorce then there is no land transaction tax to pay for the recipient. You will have to pay land transaction tax
    if you are transferring your ownership in a joint ownership to the other owner.

  • If you exchange properties with someone then you both will have to pay land transaction tax on the value of your new homes.

Get the latest posts delivered right to your inbox

Land and buildings transaction tax: What you need to know
Share this

Subscribe to Huuti