Nil Rate Band

Information on temporary increase to LBTT: nil rate band

Under the 'The Land and Buildings Transaction Tax (Tax Rates and Tax Bands) (Scotland) Amendment (No.2) (Coronavirus) Order 2020' introduced by the Scottish Government on 15 July 2020, there will be a temporary increase in the nil rate band for LBTT residential property transactions from £145,000 to £250,000.

The change takes effect from Wednesday 15 July 2020 and will remain in place until 31 March 2021.

 Purchase price

LBTT rate

 Up to £250,000

0%

 Above £250,000 to £325,000

5%

 Above £325,000 to £750,000

10%

 Over £750,000

12%

The revised rates and bands will only apply to transactions with an effective date on or after 15 July 2020.

Residential transactions for consideration of £40,000 or more will still require to be notified to Revenue Scotland even if no tax is due.

Rates for the Additional Dwelling Supplement (ADS) and non-residential LBTT remain unchanged.

 

First-time Buyer Relief

From 15 July 2020, the nil rate band threshold for LBTT for all residential transactions has been increased to £250,000 until 31 March 2021. This increase in the starting threshold is greater than that provided by the First-time Buyer Relief. The relief will therefore have no practical effect during the temporary period in which the £250,000 nil rate band threshold is in place. 



FAQs - First-time buyer relief

Q1: My transaction has an effective date on or after 15 July 2020. Can I still claim first-time buyer relief?

A: Yes, First-time Buyer Relief is still available, but as the nil rate band now applies to the first £250,000 of consideration, and this is more than the £175,000 limit that applies to First-time Buyer Relief, claiming the relief will not reduce the amount of tax due and payable.

Q2: I'm a first-time buyer and my transaction has an effective date of 15 July 2020 or later - why can’t I get a deduction of £600 against the tax due?

A: First-time Buyer Relief increased the nil rate band threshold from £145,000 to £175,000 for qualifying first-time buyers and equated to a reduction in LBTT of up to £600. However, for transactions on or after 15 July 2020, the nil rate band has been increased to £250,000 for all residential transactions with an effective date of 15 July 2020 to 31 March 2021 (inclusive). As the nil rate band threshold is now higher than the £175,000 limit for first-time buyers, claiming First-time Buyer Relief will not reduce the amount of LBTT due any further. If eligible, you can still claim First-time Buyer Relief in your LBTT return, but the amount of the relief will be £nil. 

Q3: I'm completing an LBTT return for a transaction with an effective date before 15 July 2020. Can I still claim First-time Buyer Relief?

A: Yes. You can claim First-time Buyer Relief on any qualifying transaction, but it will only have an impact on the total tax due for transactions with an effective date before 15 July 2020. 

Q4: Why is First-time Buyer Relief still showing as an option on returns even though it will not reduce the amount of tax due on transactions with an effective date on or after 15 July 2020?

A:First-time Buyer Relief is still available and hasn’t been removed under the 'The Land and Buildings Transaction Tax (Tax Rates and Tax Bands) (Scotland) Amendment (No.2) (Coronavirus) Order 2020' introduced by the Scottish Government on 15 July 2020. As it still exists in legislation, we have to provide an option for tax payers to select this relief if they wish to do so. However, selecting this relief will not reduce the amount of tax due on a transaction.

 

General information

Revenue Scotland guidance has been updated to reflect the change, as follows:

Calculating Tax

Information on tax rates and bands

Making an online LBTT return

 

FAQs - General

Q5: My transaction is about to complete, what should I do? Should I delay? Should I renegotiate the date of entry / effective date?

A: Speak to your adviser who will give you the advice you need for your transaction. Revenue Scotland cannot give advice about your circumstances.

Q6: Are changes to the residential LBTT rates and bands permanent?

A: No. This increase in the LBTT nil rate band is temporary. The change will run until 31 March 2021.

Q7: If I pay the tax now can I reclaim it later?

A: The application of the new rates and bands will be determined by the ‘effective date’ of your transaction. If the ‘effective date’ is before the date the legislation comes into force, the ‘old’ rates and bands will apply.

Legislation has been introduced with effect from Wednesday 15 July, 2020.

The revised rates and bands will only apply to transactions with an effective date on or after 15 July 2020.

Rates for the Additional Dwelling Supplement (ADS) and non-residential LBTT remain unchanged.

Q8: Will the changes apply to any transactions that took place before the date the legislation is introduced?

A: No – The revised rates and bands will only apply to transactions with an effective date on or after 15 July 2020.

Q9: If I don’t have to pay any tax as a result of these changes, do I still have to submit a tax return?

A: Yes. Residential transactions for consideration of £40,000 or more will still require to be notified to Revenue Scotland even if no tax is due. A penalty may be chargeable if the return is submitted late.

Q10: If this is the purchase of my second home do I pay no tax at all?

A: Additional Dwelling Supplement (ADS) will still be due on the purchase of second homes.

The changes in tax rates and bands will not apply to Additional Dwelling Supplement (ADS).

Rates for the Additional Dwelling Supplement (ADS) and non-residential LBTT remain unchanged.

 

Help and support

If you have any questions, please contact the Revenue Scotland LBTT Team - by Secure Message within the SETS system, or email: lbtt@revenue.scot

 

Last updated: 
11 September 2020

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