LBTT and the Additional Dwelling Supplement explained

Stamp Duty Land Tax stopped applying in Scotland in April 2015. Since then Scottish property purchases have been taxed under Land and Buildings Transaction Tax, administered by Revenue Scotland rather than HMRC, with its own bands, its own reliefs and its own return.

The structure is progressive in the same way — you pay each rate only on the slice of price that falls in that band — but the thresholds and the rates are set independently, and they differ enough that an English calculator will give a Scottish buyer the wrong number. It is the single most common mistake we see on Scottish purchases.

Three worked purchases, with each rate applied only to the slice of price inside its band:

First-time buyer relief lifts the nil rate band from £145,000 to £175,000, which is worth up to £600. It is modest, it is easy to forget on the form, and it is the sort of thing worth confirming has been claimed.

ADS is a surcharge of 8% of the whole purchase price — not just the slice above a threshold — on the purchase of an additional dwelling where the price is £40,000 or more. It rose to 8% for contracts entered into on or after 5 December 2024; the previous rate was 6%.

It catches more people than the phrase 'second home' suggests:

• Anyone who already owns a residential property anywhere in the world and buys another one in Scotland.
• Buy-to-let purchases and holiday homes, as you would expect.
• Every purchase by a company, including its very first dwelling. A limited company has no first-property exemption at all.

This is the point at which incorporating a property portfolio stops being a straightforward tax decision in Scotland. The Corporation Tax and mortgage interest arguments for holding property in a company still exist and are still UK-wide, but the 8% entry cost is real, immediate and paid in cash at completion. It belongs in the model before the decision. Our advisory service runs that comparison properly.

Non-residential purchases run on their own, much flatter, set of bands.

A £400,000 commercial unit therefore pays nothing on the first £150,000, 1% on the next £100,000 and 5% on the remaining £150,000 — £8,500 in total. Mixed-use property, such as a shop with a flat above it, is treated as non-residential, which is frequently the cheaper outcome and is worth checking before a purchase is structured.

Leases are taxed too, on the net present value of the rent over the term rather than on a purchase price, and a commercial lease carries an ongoing obligation to submit further returns every three years. That three-yearly return is the most commonly missed filing in the whole regime, because nothing arrives to remind you.

An LBTT return must be submitted and the tax paid within 30 days of the effective date of the transaction, which for a standard house purchase is the date of completion.

In practice a solicitor almost always files it as part of the conveyancing, but the legal responsibility sits with the buyer. Miss the filing date and a fixed penalty of £100 applies from the day after, with further daily penalties of £10 a day for up to 90 days once the failure has run three months past the penalty date.

The returns that get missed are rarely house purchases. They are the three-yearly lease returns, the further return when a linked transaction completes later, and the ADS reclaim where a previous main residence is sold within the allowed window. Those are the ones worth diarising.

See what else changes north of the border in our Scotland overview, or read the Scottish income tax guide if the question is really about how you take money out of the business.