Independent Review of Land and Buildings Transaction Tax: Scottish Government response

Scottish Government Response to Independent Review of Land and Buildings Transaction Tax

The Scottish Government welcomes Alma Economics independent review of Land and Buildings Transaction Tax (LBTT) and is grateful for the depth of analysis and engagement undertaken with stakeholders.

The Scottish Government commissioned independent research in January 2025, as part of the broader review of LBTT announced at Scottish Budget 2025-26 in December 2024. Alma Economics was selected to carry out this research following the conclusion of a competitive external procurement process.

The purpose of the research was to consider areas of the LBTT framework where, for example, aspects of LBTT policy diverge from the position elsewhere in the UK or where there was an identified need to explore the role of LBTT in the context of wider Scottish Government policy. Internal research has also been undertaken by the Scottish Government. Further information can be found [here]

We note the report’s conclusion that LBTT continues to operate broadly as intended, providing a progressive and proportionate framework for taxing property transactions in Scotland. The recommendations offer a constructive basis for future policy development, and the Scottish Government’s initial response to each area is set out below.

Non-residential and Mixed-Use Transactions

The review suggests maintaining the current treatment of mixed‑use and non‑residential transactions and proposes further research into apportionment. The Scottish Government notes these findings and will reflect on the potential administrative, behavioural, and fiscal implications of any future options.

Multiple Dwellings Relief

The report recommends retaining Multiple Dwellings Relief in its current form. The Scottish Government recognises the analysis presented and will continue to consider evidence on the operation of the relief, including any emerging risks or issues identified through ongoing monitoring.

Additional Dwelling Supplement

The review highlights stakeholder concerns regarding the Additional Dwelling Supplement (ADS) and its interaction with first‑time buyers and the private rented sector. The Scottish Government acknowledges these points and will continue to examine the available evidence on the impacts of ADS on different parts of the housing market

6+ Dwellings ADS Exemption

The recommendation to maintain the 6+ dwellings ADS exemption threshold is noted. The Scottish Government will keep under consideration the factors relevant to institutional investment, market developments, and ownership patterns.

First-Time Buyers Relief

The report presents a case for reviewing the first‑time buyer relief threshold, noting the effects of rising house prices and regional variation. The Scottish Government acknowledges this analysis and will continue to examine the effectiveness of the relief in supporting first‑time buyers.

LBTT Alignment with Net Zero and Just Transition

Finally, we welcome the report’s assessment of the role LBTT could play in supporting Scotland’s Net Zero and Just Transition ambitions. We acknowledge that, as a transaction-based tax, with limited numbers of sales occurring each year, LBTT is not the most effective primary lever for driving energy efficiency improvements or clean heat installations.

The Scottish Government will continue to prioritise more direct and sustained mechanisms to decarbonise heat in buildings, such as support through grants, loans and consumer advice, as well as regulatory standards, while remaining open to exploring whether targeted LBTT measures could complement wider policy tools without adding undue complexity.

Summary

The Scottish Government remains committed to ensuring that LBTT operates fairly, progressively, and in alignment with wider economic, social, and environmental objectives. The recommendations from the review provide useful evidence that will inform future consideration by the next Scottish Parliament.