Scottish property tax – when do you have to pay?

Scottish property tax rules

Understand Scottish property tax rules with our simple guide

Rules on Scottish property tax might have changed since the last time you looked at buying a house. Or maybe this is your first venture into the world of home ownership? So who pays what tax on a house sale, and when? Reading up on the official websites can leave you feeling more confused than when you started!

We’ll try to simplify the rules so you can rest easy that you’ve done all you need to do.

LBTT – Land and Buildings Transaction Tax

For the most part, you only pay tax on a house sale if you are the buyer, and this will take the form of the LBTT. It replaced the Stamp Duty Land Tax (SDLT) in 2015 as the new form of property tax in Scotland.

If this will be your only residence, tax calculation is simple. If the property is up to £145,000 in value when you buy it, you pay no tax. If it is more expensive, you pay a percentage tax, but only on the amount that is over this £145K threshold.

Example, if you buy a house that is £155,000, you pay nothing on the first £145K, and for the remaining £10,000 you pay 2% LBTT tax, so the total bill is £200.

If you’re the seller, and this is your main home, you don’t have to pay income tax or anything like that. You will just pay the tax on the next property you buy to live in.

LBTT Percentage Bands

House price LBTT rate
0 – £145,000 0%
£145,000 – £250,000 2%
£250,000 – £325,000 5%
£325,000 – £750,000 10%
£750,000 and up 12%

Multiple residences and buy to let

Complications arise when the property you’re purchasing isn’t your main home (or principal residence as they term it in the legislation). Landlords purchasing property and anyone with a flat that they want to keep and rent out when they move in with a partner might fall foul of this rule.

Even if you are co-signing on the deeds for someone else, like a child or partner, and you have your own house, you may have to pay taxes as an owner of multiple properties. You’ll have to pay ADS (Additional Dwelling Supplement) which is 3% of purchase price for all properties over £40,000.

It’s important to note that anyone buying an investment (or additional property) for over £145,000 will be subject to both LBTT and ADS so make sure you do you sums to make sure the numbers stacks up.

Buy-to-let landlords with a portfolio of properties could find the taxes mounting up.

Inheriting property

If you inherit property, say from a parent, you will have to pay Inheritance Tax (IHT) on the portion of the estate over £325,000. This portion will be taxed at a whopping 40%.

Get some advice

The solicitor you’ve engaged to do conveyancing will be able to keep you straight on most things, but if are you thinking of selling your home through Infiniti Properties, just pop into our Glasgow office for a chat and we’ll help you understand Scottish property tax.

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