The Scottish Government has approved legislation to make amendments to the Land and Buildings Transaction Tax (“LBTT”) rates which apply to non-residential property transactions, as well as to residential property purchases which are subject to an Additional Dwelling Supplement (“ADS”) charge.

What are the new rates?

The legislative changes will decrease the lowest chargeable LBTT band on non-residential transactions from 3% to 1%. In addition, the threshold for the higher rate band will drop from £350,000 to £250,000 but with a rate increase from 4.5% to 5%. The new rates apply not only to purchases of non-residential property but also to consideration payable as part of the grant of a lease (such as a lease premium).  A comparison of the new rates against the old rates can be demonstrated as follows:


Purchase PriceLBTT rate
Up to £150,0000%
Above £150,000 to £250,0001%
Above £250,0005%


Purchase PriceLBTT rate
Up to £150,0000%
Above £150,000 to £350,0003%
Above £350,0004.5%

Different slices of the consideration for non-residential transactions will continue to be charged at different rates, as opposed a single rate being applied to the whole consideration.

The new legislation will also increase the ADS charge on qualifying residential purchases from 3% to 4%, which will be charged on the whole of the consideration.

When do the new rates come into force?

The new rates come into force with effect from 25 January 2019. However, the new rates will not apply to transactions that complete on or after this date if the contract was entered into before 12 December 2018.

How does this compare with the rest of the UK?

Whilst the changes to the rates for non-residential transactions will lead to marginally less tax being payable on transactions below the £350,000 mark, it will lead to an increased LBTT charge on purchases of £350,000 or more. Broadly speaking, the Scottish position is now more closely aligned with the Stamp Duty Land Tax (“SDLT”) regime in the rest of the UK. Whilst this will mean that Scotland has lost its competitive advantage of having lower rates at the high end of the market, the new rates will still mean that the LBTT charge on a non-residential purchase can never be higher than the current SDLT equivalent on a purchase elsewhere in the UK.

However, the changes to the ADS rates do mean there is a disparity with similar charges in the rest of the UK, which remain at 3%. Whilst a key aim of the legislation is to enable first time buyers to better compete with buy-to-let investors, the changes could lead to reduced investment in private rented properties and lead to increases in rent to offset against the increased tax liability.

As always, it remains to be seen as to whether the new legislation will achieve its aims or whether it will affect property investment in Scotland in comparison with the rest of the UK.