Land and Buildings Transaction Tax review: Scottish government policy evaluation 2025-2026

Introduction

As part of the Scottish Budget 2025–26, the Scottish Government committed to an evaluation of selected elements of Land and Buildings Transaction Tax (LBTT) policy. The purpose of this initial evaluation is to assess whether current policy continues to operate as intended, and to identify areas where improvements or changes could be explored further in the next parliamentary term, subject to direction from the incoming government.

This report covers three aspects of the LBTT Review undertaken by the Scottish Government:

• Section A examines the LBTT arrangements for non‑residential leases.
• Section B considers the impact of the Additional Dwelling Supplement (ADS) where difficult or exceptional circumstances apply.
• Section C explores the potential for a new LBTT relief for transactions carried out under Community Rights to Buy arrangements. Inclusion of this issue within review flowed from consideration of an amendment submitted to the Land Reform (Scotland) Bill.

In addition to this report, the Scottish Government also commissioned independent research from Alma Economics, following a competitive external procurement process.

The research explored key areas of the LBTT framework where policy diverges from arrangements elsewhere in the UK, or where the Scottish Government considered that further investigation was needed to understand how LBTT interacts with broader policy objectives. Alma Economics’ full report and the Scottish Government’s response can be found on gov.scot.

Evidence and Methodology

Findings in this report draw on a range of evidence sources, including:

• Revenue Scotland (RS) operational data relating to lease reviews, compliance and penalties.
• Legislative analysis and comparator exercises where relevant, including reference to SDLT and LTT.
• Stakeholder views gathered through an LBTT Review Working Group.

The review working group has supported the Scottish Government’s exploration of the policy and operational considerations associated with the LBTT arrangements applying to non-residential leases and the possible introduction of exceptional circumstances provisions.

Working group members provided their expertise and practical experience of property taxation across the UK, as well as their insight into the particularities of the Scottish legislative context.

Scottish Government officials chaired and provided the secretariat function for the meetings. The group involved representatives from:

• Morton Fraser Macroberts LLP
• Scottish Property Federation
• Chartered Institute of Taxation
• Registers of Scotland
• Brodies Solicitors
• Saffery LLP
• Pinsent Masons LLP
• Ernst & Young
• Law Society of Scotland
• Association of Taxation Technicians
• Revenue Scotland

Any references to RS guidance in this report are provided solely to illustrate practical interpretation of the legislation. RS’s guidance reflects its own view, does not have legal status, and readers should refer to the legislation itself when considering the legal position.

Alignment with the Scottish Government’s Framework for Tax

The Scottish Government’s Framework for Tax sets out core principles which guide the development and operation of Scotland’s tax system. These principles provide important context for assessing the performance of existing legislation.

In practice, they require that any legislation:

• is clearly defined and capable of consistent application (certainty);
• supports the policy objectives of the LBTT framework without introducing unintended consequences (effectiveness);
• can be administered proportionately and without placing undue pressure on taxpayers and Revenue Scotland (efficiency);
• reflects the views and evidence shared by taxpayers, practitioners and delivery partners (engagement);
• is proportionate in its design and impact, ensuring that obligations placed on taxpayers and administrators are commensurate with the level of tax at stake (proportionality); and
• is convenient for taxpayers to comply with, supporting clear processes, accessible guidance and timely administration that minimise unnecessary complexity (convenience).

These principles underpin the analysis in this paper. The Framework for Tax is available on the gov.scot website.

Legislative Certainty and Boundaries

The LBTT system operates on the basis of clear statutory rules designed to provide certainty for taxpayers, agents and administrators.

As with all rules‑based systems, defining when tax is or is not due can lead to some cases falling just outside legislative boundaries. Although the outcomes may feel unfair in individual circumstances, such boundaries are necessary for the effective and consistent operation of the tax.

LBTT, including the ADS, also plays a significant role in supporting public finances. Any changes to legislation must therefore balance fairness and proportionality with clarity, consistency and the core policy purposes of the tax.