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.

 

Guidance

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

First-time buyer relief

 

FAQs - General

Q: 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.

Q: 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.

Q: 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.

Q: 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.

Q: 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.

Q: 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.

 

FAQs - First-time buyer relief

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

A: Yes. You are encouraged to claim first-time buyer relief, if you meet the eligibility criteria, in order to indicate that you are a first-time buyer.  However, as the new nil rate band now applies to the first £250,000 of consideration, which is more than the £175,000 that applies to first-time buyer relief, claiming the relief will not reduce the amount of tax due and payable.

Q: If first-time buyer relief will not reduce my tax liability, why should I claim it?

A: Revenue Scotland reports the number of first-time buyers in its statistics publications so we would encourage you to identify yourself as a first-time buyer by claiming the relief if you meet the qualifying criteria. For information on the qualifying criteria, see our guidance at LBTT3048

Q: 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 effectively increased the nil rate band threshold from £145,000 to £175,000 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 for first-time buyers, the relief will not reduce the amount of LBTT due any further. You can still claim first-time buyer relief in your tax return, if you meet the conditions for doing so, but the amount of the relief will be £nil.

Q: I am completing an LBTT return for a transaction with chargeable consideration of more than £250,000 and an effective date of 15 July 2020 (or later) and claiming first-time buyer relief. Why is SETS showing a figure for the relief when none is due ?

A: We are aware that SETS is currently applying an amount of first-time buyer relief when it is claimed for transactions above £250,000 and we are working on a fix for this. In the meantime see additional guidance on how to overwrite the value of the relief as £nil. PDF iconHow To - Nil rate band change - First time buyer relief - Taxpayer guidance - Jul20.pdf

Q: Why is SETS showing the wrong figure for first-time buyer relief and why can’t you stop it doing so?

A: We are aware of this issue but believe it will only affect a small number of transactions. In order to maintain access to SETS for the majority of users we will be making a change to update our system at a later date.

 

Help and support

If you have any questions, please contact Revenue Scotland by email: lbtt@revenue.scot

 

Last updated: 
16 July 2020

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