The draft Scottish Budget 2019-20: What does this mean for LBTT?

  • Insight

12 December 2018

The Scottish Finance Secretary, Derek Mackay, laid out his Scottish Budget for 2019-2020 on the 12th December.

The Budget proposed several changes relevant to the Scottish Property market, most notably to the devolved LBTT property tax regime. So what do the proposed changes actually mean to those purchasing property in Scotland today?

Additional Dwelling Supplement (ADS)

In Scotland, ADS is already payable at 3% on certain purchases of additional residential property with a price of £40,000 or more. The rules mean that if a purchaser of a property in Scotland is subject to ADS, a tax charge of 3% of the purchase price will payable by them in addition to any ‘ordinary’ LBTT payable.

It was announced today by the Scottish Government that they will increase the ADS tax charge from 3% to 4% on all property transactions from 25 January 2019.

Since its introduction on 1 April 2016, ADS intake has already exceeded Government expectations with provisional revenues of £107.3m (nearly 50% above expectations) by the middle of this year.

This new tax increase is forecast to increase the Scottish Government’s revenue by £25.4 million in 2019-2020.

The 3% rate will be retained post 25 January 2019 for contracts entered into before 12 December 2018.  Otherwise, it is still possible to conclude and complete before 25 January to take the benefit of the 3% rate.

This increase is unexpected but has been announced as part of the Scottish Government’s stated policy to help first-time buyers onto the housing market. It will be interesting to see how this rate change will impact the buy-to let market in Scotland but what is clear is that the ‘second home tax’ is here to stay in Scotland.

Non-residential rates

LBTT non-residential rates are also set to change under the draft Budget with a Scottish Government announcement that they intend to lower the rate of non-residential LBTT from 3 per cent to 1 per cent and increase the upper rate from 4.5 per cent to 5 per cent. The starting threshold will also be decreased from £350,000 to £250,000. Residential LBTT rates will remain the same. See a table of the updated LBTT rates below:

Residential transactions


Non-residential transactions


Purchase price

LBTT rate

Purchase price

LBTT rate

Up to £145,0000%Up to £150,0000%
£145,001 to £250,0002%£150,001 to £250,0001%
£250,001 to £325,0005%Over £250,0005%
£325,001 to £750,00010%  
Over £750,00012%  

Again, these changes will come into force from 25 January 2019.  Existing rates will be retained for transactions completing post 25 January 2019 where the contract was entered into before 12 December 2018.

Property investment funds reliefs

Mr Mackay also announced the introduction of two reliefs from LBTT for property investment funds in order to safeguard the investment in Scottish real estate:

• a relief for the ‘seeding’ (initial transfer) of properties into a Property Authorised Investment Fund (PAIF) or Co-owned Authorised Contractual Scheme (CoACS); and

• a relief for when units in CoACS are exchanged.

The Scottish Government believes that these reliefs will increase the global attractiveness of Scotland as an investment destination. 

All of these changes will be subject to a successful passage of the Budget through Parliament and we await further detail on all of these changes once the draft bill is published.

We will continue to update as more information is given. We have a large number of tax and property specialists who have  are able to provide you with practical, commercial and tax-effective solutions to guide you through these new changes.

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