Land and Buildings Transaction Tax: review

Footnotes

1 Note that although SDLT initially operated under a slab-based system, it shifted to a slice-based structure prior to the introduction of LBTT.

2 Note that this pattern, where revenues from residential returns have exceeded those from non-residential returns, was also evident prior to the introduction of LBTT.

3 Under LBTT legislation, transactions comprising six or more residential properties are also treated as non-residential for tax purposes, enabling them to benefit from the lower non-residential LBTT rates.

4 The ADS is a charge paid in addition to LBTT when someone who already owns a residential property purchases another one without replacing their only or main residence. It is not applied to non-residential transactions; however, it can apply to the residential portion of mixed property transactions (Land and Buildings Transaction Tax (Scotland) Act 2013, Sch 2A). The ADS rate has increased gradually from 3% of the purchase price of the additional property in 2019 to 8% as of 2025 (IFS, 2025). The successive increases have been justified on the basis of “protect[ing] opportunities for first-time buyers in Scotland, reinforcing the progressive approach in place for LBTT rates and bands” (Scottish Government, 2018b; Scottish Government, 2022b; Scottish Government, 2024a).

5 An arrangement in which a first-buyer contracts to acquire land or buildings from a seller and, under a separate contract, agrees to sell all or part of that acquisition to a second buyer (Scottish Government, 2015a).

6 It should be noted that all three UK property transaction taxes are now calculated using a “slice” system, where each tax rate applies only to the portion of the price within its band and the tax amounts for each band are summed for the final tax payable. Scotland’s LBTT has worked this way from its introduction on 1st April 2015, and Wales’s LTT has done so since it began on 1st April 2018 (Land and Buildings Transaction Tax (Scotland) Act 2013, s 25; Welsh Revenue Authority, 2024). SDLT originally followed a “slab” system, where the entire price is taxed at a single rate once a threshold was crossed, creating cliff edges in tax liability. However, SDLT also moved to a slice structure for residential transactions on 4th December 2014 and for non-residential/mixed transactions on 17th March 2016 (HM Revenue & Customs, 2014; HM Treasury, 2016).

7 Defined by Revenue Scotland and Tax Powers Act 2014, asp 16 as when the relevant activity satisfies either or both of the following conditions: (i) it is “not a reasonable course of action in relation to the tax legislation“; or (ii) it “lacks economic or commercial substance”, such as where the arrangement is carried out in a manner that does not accord with “reasonable business conduct.”

8 It should be noted that pre-devolution transaction data for the UK’s constituent countries were not collected in the same detail as post-devolution data and may be less reliable.

9 Sources: Land and Buildings Transaction Tax (Scotland) Act 2013, Sch 5; Felix & Co. Accountants (2025); Macdonald (2023)

10 Whichever is the shorter of: (i) three years beginning with the effective date of the transaction, or (ii) the period from the effective date of the transaction to the date the buyer disposes of the dwelling(s) to a person not connected with the buyer (Revenue Scotland, 2022 interpretation).

11 Source: Land and Buildings Transaction Tax (Scotland) Act 2013

12 Note that, given the increase in house prices since the introduction of First-Time Buyers’ Relief, it is now likely that more first-time buyers are liable to pay LBTT.

13 Sources: The Land and Buildings Transaction Tax (First-Time Buyer Relief) (Scotland) Order 2018, Land and Buildings Transaction Tax (Scotland) Act 2013

14 This refers to ownership of land or a tenant’s right over or interest in land subject to a lease. In the case of first-time buyer relief, a major interest excludes renting under a standard statutory private residential tenancy (Revenue Scotland, 2024e interpretation).

15 Average first-time buyer house prices in October 2025.

16 A sale and leaseback transaction involves selling a property for a lump sum to an investor who then leases it back to the seller on a rent-payment basis (Clifford Chance, 2020).

17 Crofting communities’ right to buy eligible croft land regardless of whether the owner wishes to sell or not, introduced by the Land Reform (Scotland) Act 2003 (Scottish Government, 2025b).

18 An arrangement in which a first buyer contracts to acquire land or buildings from a seller and, under a separate contract, agrees to sell all or part of that acquisition to a second buyer (Scottish Government, 2015x).

19 A type of collective investment scheme authorised by the Financial Conduct Authority (Financial Conduct Authority, 2025).

20 A type of collective investment scheme that is structured and incorporated as a company with variable capital (HM Revenue & Customs, 2025).

21 Where a lender takes a pledge over shares of a purchasing company, such that it could obtain control of that company. In Scottish banking, this is a common method of pledging collateral to secure a loan (Hillan, 2018).

22 A Green Freeport is a large, zoned area that includes a railway, seaport, or airport intended to: (i) promote regeneration and job creation, (ii) support decarbonisation and a Just Transition, (iii) establish a global trade and investment hub, and (v) foster innovation (Revenue Scotland, 2024j).

23 This refers to when a company splits their activities into two or more separate companies but with shareholders retaining the same proportion of shares in the demerged business as prior to the demerger (Finch, 2025).

24 Note that non-residential reliefs may apply to types of returns other than conveyances, such as new lease returns.