Property tax in Scotland. What do I pay and when?
Are you thinking of selling & buying a new house. Considering a move from elsewhere around the world to beautiful Scotland? A lot has changed over the years in regards to property tax in Scotland when buying a house.
Here we explain everything about property tax in Scotland. What do I pay and when? Do I pay it when selling or buying? Hopefully the below information will help simplify it all for you.
Land and Building Transaction Tax (LBTT)
What is LBTT?
For many many years we had a property tax called Stamp Duty here in Scotland. On the 1st April 2015 this was replaced with LBTT – Land and Building Transaction Tax. LBTT is a tax applied to purchases of residential property in Scotland. Therefore you pay LBTT when buying a house, not when selling.
Is it paid on every residential property?
LBTT is paid on every residential property purchase in Scotland from the purchase price of £145,001. £145,000 and below no LBTT is applicable.
How much is LBTT?
You pay a percentage on a certain apportionment of the purchase price. On the basis this would be your only property, LBTT is payable as follows:
| Purchase Price | LBTT Rate |
| Up to £145,000 | 0% |
| £145,001 – £250,000 | 2% |
| £250,001 – £325,000 | 5% |
| £325,001 – £750,000 | 10% |
| £750,000 and above | 12% |
As a little example for you. If you buy a house for £200,000 you will pay no LBTT on the first £145,000. Then 2% on the remaining £55,000. Meaning your total LBTT payment would be £1,100. (On the basis you are not a first time buyer and do not own any other property)
A really great calculator that I use all the time is on the Scottish Government website. Click here
Additional Dwelling Supplement (ADS)
What is ADS?
The Additional Dwelling Supplement (ADS) was introduced by the Scottish Government back in April 2016. This additional tax, payable above & beyond LBTT, applies to all transactions involving the purchase of an additional residential dwelling over the value of £40,000. An additional dwelling includes the likes of a buy to let property or second homes.
Why was ADS property tax introduced?
There are various reasons why this additional property tax was introduced by the Government here in Scotland, but they say mainly to protect the opportunities for first time buyers. Ensuring wealthy people buying second homes didn’t gobble them all up leaving first time buyers with no properties to purchase at an affordable level.
It is really important to protect the opportunities for First Time Buyers, but my goodness, ADS adds on a huge amount of tax and certainly deters buyers of second homes here in Scotland!
Not only that, but it was typically 4% of the purchase price and in December 2022 it increased to 6%!
How much is ADS in Scotland?
What do we pay for ADS, remembering it is above and beyond the standard LBTT payment. This table should help you out and again the Scottish Government has a great wee calculator for you to use here
| Purchase Price | LBTT Rate | ADS Rate |
| Up to £145,000 | 0% | 6% (starts at £40k) |
| £145,001 – £250,000 | 2% | 8% |
| £250,001 – £325,000 | 5% | 11% |
| £325,001 – £750,000 | 10% | 16% |
| £750,000 and above | 12% | 18% |
So lets see what LBTT & ADS might be payable for a purchase of at £300,000, on the basis you are not a first time buyer:
LBTT will be ——– 0% on first £145,000 – 2% on £145,001 to £250,000 – 5% on £250,001 to £300,000 = TOTAL £4,600
ADS will be ———- 0% on first £40,000 – 6% on £40,001 to £145,000 – 8% on £145,001 to £250,000 – 11% on £250,001 – £300,000 = TOTAL £18,000
TOTAL: £22,600
Michty me – that is a fair old amount of money! Lets get saving if we want the little Scottish bothy on the coast as a holiday home. Property tax in Scotland can be a little steep 😉
Oh and to add to this – if this second home would be a joint purchase with a partner/friend or family member and only one of you owns another property, then it still applies.
Who pays the property tax in Scotland?
Almost on every occasion the purchaser of the property is responsible for paying tax, and this will mostly be in the form of LBTT (Land & Building Transaction Tax).
If you’re the seller, and this is your main home, you don’t have to pay LBTT, or any other property tax in Scotland. You will just pay all the necessary taxes on the next property you buy to live in.
In a nutshell, as sellers we nearly never pay tax, but as buyers we nearly always pay tax. Clear as mud huh!
What do First Time Buyers pay in property tax?
First time buyers are still applicable to pay LBTT, the main property tax in Scotland. However, in 2018 the Scottish Government introduced a tax relief for First Time buyers. First time buyers do not pay LBTT on a property purchase at, and below, £175,000.
| Purchase Price | LBTT Rate |
| Up to £175,000 | 0% |
| £175,001 – £250,000 | 2% |
| £250,001 – £325,000 | 5% |
| £325,001 – £750,000 | 10% |
| £750,000 and above | 12% |
As another little example for you. If you are a first time buyer and you buy a house for £200,000 you will pay no LBTT on the first £175,000. Then 2% on the remaining £25,000. Meaning your total LBTT payment would be £500.
Saving you a whopping £600!
Property Tax in Scotland is unavoidable when you are purchasing and it can really be a mine field of numbers. Hopefully this gives you a good overview of the varying tax’s and who pays them.
These below posts may also be super helpful to you:
Moving from England to Scotland. The house buying process.