Tue 29 Jan 2019

How much LBTT tax?

Following the approval of the 19/20 Budget by the Scottish Parliament the rates of Land and Buildings Transaction Tax (LBTT) on non-residential properties, and the rate of Additional Dwelling Supplement (ADS) for residential property have changed.

 Rates pre 25 January 2019New Rates from 25 January 2019 
ADS3% 4% 
LBTT on non-residential propertyUp to £150,0000%Up to £150,0000%
£150,001 - £350,0003%£150,001 - £250,0001%
Over £350,0004.5%Over £250,0005%

The new non-residential LBTT rates benefit purchasers whose properties fall below a certain threshold (~£300,000).

Take for example a non-residential property purchased for £275,000. Under the old rates the LBTT would have been £3,750, whereas under the new rate the tax will be £2,250.

A residential purchase for the same amount would attract tax of £3,350.

It is also interesting to note that where a transaction involves a mix of both residential and non-residential property (e.g. a Landed Estate, or a shop with a flat above it), it is generally treated as a non-residential transaction. The Revenue Scotland guidance confirms that a property will be non-residential if the main-subject matter of the transaction consists of or includes an interest in land that is non-residential property. Having said that though each transaction needs to be considered on its own merits - there can be arguments about what the main subject matter actually comprises.

The rules on Additional Dwelling Supplement remain the same, and the usual reliefs and exceptions apply. Unlike LBTT, if you are buying a second property that has both residential and non-residential elements, ADS will apply. However, it will only apply to the amount of the purchase price relating to the residential element (calculated on a just and reasonable basis).

So, say our theoretical £275,000 property is a residential house but as part of the same purchase we're also getting some commercial property worth £200,000, and that you already own a house worth £75,000. You will pay LBTT at the non-residential rate for the total price of £475,000 (£12,250) and you will also pay ADS on the £275,000 (£11,000), since you already own a residential property worth more than £40,000. This gives you a total tax bill of £23,250.


It's worth noting that ADS does not just apply where you yourself hold title to an existing property. For the purposes of deciding whether ADS applies you, your spouse, civil partner, cohabitant, and dependent children, will all be treated as a single buyer. So if your spouse owns a house worth £40,000 or more, even if it's held in their sole name, it will count as a property already owned by you when deciding whether ADS applies to your purchase. Residential property owned in any other country with a market value equivalent to £40,000 or greater will be counted when determining whether ADS will apply to your transaction. Exactly the same rules will apply as if you owned property in Scotland, or elsewhere in the UK.

This is just a brief over view of this tax and there are other points in the legislation that might affect what you have to pay and whether there are any reliefs available.

If you want to find out more about how these tax changes might affect your rural property purchases, please contact the Agricultural and Rural Property Team at Morton Fraser.

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