Land and Buildings Transaction Tax (LBTT) legislative changes
From 1 April 2024, a new LBTT relief for local authority purchases will be introduced. Changes will also be made to the way in which the Additional Dwelling Supplement (ADS) is applied, for transactions with an effective date on or after 1 April 2024.
The effective date in the majority of cases will be the date the transaction is completed.
Please note: changes are not retrospective.
Timeline for replacing a main residence
The previous 18-month timeline is now replaced with a 36-month timeline.
The means that a buyer can sell a Previous Main Residence 36 months before or after the effective date, to be considered as replacing a main residence for ADS purposes.
Small shares in a property
Previously, if the total value of a dwelling was £40,000, or more this would be counted as ownership of a dwelling for the purposes of the ADS, regardless of your share value.
This has now changed to look at your share of the ownership. If this is less than £40,000, ownership of the dwelling will not be considered for the purposes of the ADS.
Inherited dwellings
If the buyer inherits a dwelling between entering into a contract and the completion date for the purchase of a new main residence, the inherited dwelling will not count towards the number of dwellings owned for the purposes of the ADS.
It may count towards the number of dwellings owned for future transactions.
Divorce or separation
Divorce and separation exception if the following conditions are met:
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two dwellings owned at the end of the effective date and
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the first dwelling was at any time their previous main residence, with a spouse, civil partner, former spouse, or former civil partner and
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the first dwelling remains the main residence of the buyer’s spouse, civil partner, former spouse, or former civil partner and there is no intention to live together again as civil partner or spouse and
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the ownership retained in the first dwelling is due to a court order or formal agreement in connection with:
- dissolution or annulment of the civil partnership
- Separation or divorce
In such cases the dwelling is not considered as a dwelling owned for the purposes of the ADS.
Joint buyers
Only one of the buyers are required to meet repayment conditions where only one of them brought the transaction into charge:
a) within the period of 36 months beginning with or ending with the day after the effective date of the transaction, the buyer disposes of the ownership of a dwelling (other than one that was or formed part of the subject-matter of the chargeable transaction), (one of the buyers)
b) that dwelling was the buyer's only or main residence at any time during the period of 36 months ending with the effective date of the transaction, (one of the buyers)
c) the dwelling that was or formed part of the subject-matter of the transaction has been occupied as the buyer's only or main residence. (all buyers)
d) where there are two or more buyers who are or will be jointly entitled to the interest acquired, each of whom own a dwelling or dwellings other than the subject-matter of the transaction, all of the buyers must meet the conditions a), b) and c). (all buyers)
Local authorities
Local authorities previously were liable to pay LBTT and the ADS. Local authority transactions will now be able to claim relief from both LBTT and ADS charges if they meet either of the following qualifying conditions.
The transaction comes under Section 2 of the Housing (Scotland) Act 1987 or Section 2 of the Housing (Scotland) Act 1988.
Further guidance
Further detailed information can be found in the following areas:
ADS general guidance and ADS technical guidance sections.
Guidance on how to claim an ADS repayment.
Relief for certain acquisitions by local authorities.