Schedule 4A to the Land and Buildings Transaction Tax (Scotland) Act 2013, as introduced by the Land and Buildings Transaction Tax (First-Time Buyer Relief)(Scotland) Order 2018 provides relief for first-time buyers of a dwelling in Scotland. This relief consists in tax not being chargeable in respect of the first £175,000 of consideration payable in respect of any chargeable transaction.
The Land and Buildings Transaction Tax (Tax Rates and Tax Bands) (Scotland) Amendment (No. 2) (Coronavirus) Order 2020 temporarily increased the nil rate band for all residential property transactions with an effective date between 15 July 2020 and 31 March 2021 (inclusive) to £250,000. As this is higher than the £175,000 provided for by the first-time buyer relief, the relief may still be claimed during this period but it will not reduce the amount of LBTT due for transactions with an effective date during that period.
Residential property transactions with an effective date prior to 15 July 2020 will continue to benefit from a reduction in the tax payable if the conditions set out below are all met and first-time buyer relief is claimed.
Description of relief
Subject to certain conditions, first-time buyer relief is available to any first-time buyers who acquire a dwelling which they intend to occupy as their only or main residence.
The relief only applies to transactions where the contract is entered into on or after 9 February 2018 and where the effective date of the transaction is on or after 30 June 2018.
The first-time buyer claims the relief at the point when they submit an LBTT return in relation to the land transaction, or in an amendment of that return.
Relief Conditions
Each of the following qualifying conditions must be met for the relief to be available:
the transaction is an acquisition of a major interest in land;
the land consists entirely of residential property and includes a dwelling;
the buyer is a first-time buyer who intends to occupy the dwelling as the buyer’s only or main residence;
the transaction is not a linked transaction (see exception to this rule in the ‘Linked transaction’ section of this guidance); and
the transaction is not one to which Additional Dwelling Supplement (“ADS”) applies (see LBTT10001)
Where there is more than one buyer the relief will be available only if each buyer meets all the relevant criteria. If any of the buyers do not meet all the conditions then the relief will not be available.
Amount of relief
This following section of guidance on the amount of first-time buyer relief only applies to transactions with an effective date prior to 15 July 2020.
Please note: For transactions with an effective date between 15 July 2020 and 31 March 2021, the temporary increase in the nil-rate band meant first-time buyer relief had no practical effect.
The relief consists in tax not being chargeable in respect of the first £175,000 of consideration payable in respect of any chargeable transaction. It therefore effectively raises the zero tax threshold for first-time buyers from £145,000 to £175,000. First-time buyers buying a property above £175,000 will also benefit from the relief on the portion of the price below the threshold. This means all first-time buyers will benefit from the relief by up to £600.
The table below sets out illustrative examples of the amount of tax which would be due for various transactions with and without the relief:
| Purchase Price | Tax Due - With Relief | Tax Due - Without Relief |
| £150,000 | £0 | £100 |
| £175,000 | £0 | £600 |
| £200,000 | £500 | £1,100 |
| £250,000 | £1,500 | £2,100 |
The LBTT on Property Transactions calculator has been updated to assist first-time buyers and their agents in determining how much tax will be payable on their purchase after the relief has been claimed.
Note: Any references to ownership below are to properties both previously and currently owned, whether title was taken either individually, jointly or in common pro indiviso (i.e. where ownership of a dwelling is/was held by two or more parties in individual shares).
A first-time buyer means a person who does not own nor has previously owned a dwelling in Scotland, the rest of the UK or the rest of the world.
All forms of ownership in the legal systems of the rest of the UK which are equivalent to ownership in Scotland are treated as ownership for the purposes of this relief.
For instance, a dwelling for which an individual holds a tenant's interest under certain types of lease in the rest of the UK would count towards dwellings owned by an individual. Additionally, the prevailing Scottish concepts regarding ownership apply across the foreign legal systems and must be read in accordance with the prevailing law and practice of the country in which the dwelling is situated when determining whether an individual owns a dwelling outside of Scotland.
Gifted or inherited dwellings
Gifted or inherited dwellings are also taken into account when determining if an individual is a first-time buyer.
LBTT(S)A 2013 schedule 4A paragraph 2
Trusts
The treatment of dwellings held in trust by trustees for the purposes of first-time buyer relief is similar to how the ADS applies to these type of transactions (see LBTT10063). This means that an individual who is or was a beneficiary under:
- a bare trust (see LBTT8002), or
- a settlement trust (see LBTT8003) where they have a relevant interest in the dwelling(s)
is treated for the purposes of first-time buyer relief as being or having been the owner of the dwelling(s).
A beneficiary under a settlement trust has or had a relevant interest in a dwelling that is or was part of the trust property if the beneficiary is or was entitled to:
- occupy the dwelling for life, or
- income (whether net or gross) in respect of the dwelling.
Relief will be available when a dwelling is purchased by a bare trust, or a settlement trust where the beneficiary will have relevant interest in a dwelling, if the beneficiary is a first-time buyer.
LBTT(S)A 2013 schedule 4A paragraph 5
Trustees or personal representatives
If an individual owns a dwelling in their capacity as a trustee or personal representative of another (i.e. an executor) then that individual is not deemed to be the owner of that dwelling for the purposes of first-time buyer relief.
There should normally be little difficulty in determining if someone intends to occupy the dwelling as their only or main residence.
The buyer does not need to occupy the dwelling immediately upon purchase. For example, if structural repairs or renovation work are required then it may be that the buyer moves to temporary accommodation until they are complete. In such instances, there must be a clear intention to occupy the dwelling as the buyers only or main residence after the works are completed and consideration must be given to the full facts and circumstances of the case.
Relief cannot be claimed where evidence clearly shows that either another dwelling will continue to be the buyer’s main residence or that the newly purchased dwelling has been acquired for some other purpose (such as it being acquired using a buy-to-let mortgage).
Major interest
References to ‘major interest’ in the LBTT(S)A 2013 are to:
- ownership of land, or
- the tenant’s right over or interest in land subject to a lease.
For the purposes of first-time buyer relief, major interest does not include the tenant’s interest in a private residential tenancy regulated by statute under the Rent (Scotland) Act 1984, the Housing (Scotland) Act 1988 or the Private Housing (Tenancies) (Scotland) Act 2016.
LBTT(S)A 2013 schedule 4A paragraph 7(1)
Residential property
For the purposes of LBTT, a residential property is:
- a building that is used or suitable for use as a dwelling, or is in the process of being constructed or adapted for use as a dwelling;
- land that forms part of a garden or grounds of a building suitable for use as a dwelling. This includes any buildings or structures on such land; or
- an interest in or right over land that subsists for the benefit of any of the above.
See LBTT4010 for further information on the meaning of residential property.
Dwelling
The multiple dwellings relief definition of ‘dwelling’ contained in part 6 of schedule 5 to the LBTT(S)A 2013 applies for the purposes of determining what counts as a dwelling for the purposes of first-time buyer relief.
See LBTT10018 for further information on the definition of a dwelling
If ADS is payable on the transaction first-time buyer relief is not available.
First-time buyer relief is not available if the transaction is one of a number of linked transactions (see LBTT2008). However, this rule does not apply if the linked transaction is the acquisition of:
- land that is, or is to be, occupied or enjoyed as the garden or grounds of the dwelling upon which relief was claimed; or
- land that subsists, or is to subsist, for the benefit of that dwelling.
In such instances, first-time buyer relief will be available on the total consideration of all the linked transactions.
First-time buyer relief is withdrawn if, following the relief being claimed, the transaction becomes linked by virtue of a later linked transaction.
Relief is not, however, withdrawn if the later linked transaction is the acquisition of:
- land that is, or is to be, occupied or enjoyed as the garden or grounds of the dwelling upon which relief was claimed; or
- land that subsists, or is to subsist, for the benefit of that dwelling.
Where relief is withdrawn, the taxpayer must make a further LBTT return to Revenue Scotland (see LBTT4015). There may also be a requirement to submit an LBTT return in respect of the later transaction.
Claiming the relief
To claim this relief see the guidance on 'How to make an LBTT return and pay tax’.
Worked Examples
Worked examples reflect the LBTT residential rates and bands that apply to transactions with an effective date prior to 15 July 2020 and are for illustrative purposes only.
Please note: For transactions with an effective date of 15 July 2020 to 31 March 2021 (inclusive), the amount of tax saved by first-time buyer relief will be £nil due to the temporary increase in the nil rate band.
Red and Green purchase a dwelling for £175,000 on 1 July 2018 which they will use as their main residence. Neither Red or Green have ever owned a dwelling and they both meet the definition of a first-time buyer.
A claim for first-time buyer relief is made on the first LBTT return submitted for the transaction. The amount of LBTT due on the transaction is calculated as follows:
| 0% on the first £145,000 | £0 |
| 2% on the remaining £30,000 | £600 |
| Less First-Time Buyer relief claimed | £600 |
| Total LBTT due on this transaction | £0 |
Red and Green are not due to pay any LBTT as they are entitled to the full relief of £600 (although a return must still be filed).
Grey purchases a dwelling for £150,000 on 1 August 2018 which they will use as their main residence. Grey has never owned a dwelling and meets the definition of a first-time buyer.
A claim for first-time buyer relief is made on the first LBTT return submitted for the transaction. The amount of LBTT due on the transaction is calculated as follows:
| 0% on the first £145,000 | £0 |
| 2% on the remaining £5,000 | £100 |
| Less First-Time Buyer relief claimed | £100 |
| Total LBTT due on this transaction | £0 |
Grey is not due to pay any LBTT as they are entitled to full relief of £100 (although a return must still be filed).
Yellow and Blue purchase a dwelling for £250,000 on 15 July 2018 which they will use as their main residence. Neither Yellow or Blue have ever owned a dwelling and they both meet the definition of first-time buyer.
A claim for first-time buyer relief is made on the first LBTT return submitted for the transaction. The amount of LBTT due on the transaction is calculated as follows:
| 0% on the first £145,000 | £0 |
| 2% on the remaining £105,000 | £2,100 |
| Less First-Time Buyer relief claimed | £600 |
| Total LBTT due on this transaction | £1,500 |
Yellow and Blue are entitled to the full amount of first-time buyer relief, however the maximum amount of relief that can be claimed is £600, therefore the total LBTT due on the transaction is £1,500.
Pink was gifted a dwelling by one of their grandparents which they then sold. Pink is now purchasing a dwelling for £300,000 on 1 November 2018 which they will use as their main residence.
As Pink previously owned a dwelling, they are not a first-time buyer therefore they cannot make a claim for the relief on their LBTT return.
Only one buyer is a first-time buyer
Pink and Purple live together in rented accommodation. Pink has never owned any property, but Purple used to own a dwelling in Belgium which they have since sold.
Pink and Purple purchase a dwelling for £195,000 on 1 September 2018 which they will use as their main residence.
Whilst Pink meets the definition of first-time buyer, Purple does not. Therefore, a claim for the relief cannot be made on the LBTT return.
Orange lives with their spouse Red in a dwelling which is owned by Red. Orange then purchases a dwelling for £200,000 which they will both use as their new main residence. Red will retain the current dwelling and use it as a holiday-let.
Orange has never owned a dwelling and meets the definition of a first-time buyer. However, for the purposes of ADS, they are deemed to own the dwelling owned by Red, and as Orange is not replacing their main residence – by selling or disposing of the ownership of their previous main residence – the ADS will apply to the transaction.
As first-time buyer relief is not available where ADS applies to a transaction, Orange cannot make a claim for the relief on their LBTT return.
Blue and Green are the trustees of a bare trust for the benefit of Yellow. Blue and Green, as trustees, own a dwelling which they use as a buy-to-let investment to generate income for the trust.
Yellow then purchases a dwelling for £175,000 on 1 December 2018 which they will use as their main residence.
Although title to the buy-to-let dwelling is registered in the Land Register in the name of the trustees, for the purposes of the first-time buyer relief, Yellow, as beneficiary, is deemed to be the owner of the dwelling. This means that Yellow cannot make a claim for the relief on his LBTT return.
Blue, the trustee of a discretionary settlement for the benefit of Black, purchases a dwelling as a trustee. Black does not have a right to occupy the dwelling under the trust, nor can they require Blue to pay them any income from the dwelling.
Black purchases a dwelling for £160,000 on 1 February 2019 which they will use as their main residence.
Black has never owned a dwelling, and as their possible future benefit from the trust does not amount to a relevant interest in the trust dwelling, they meet the definition of a first-time buyer.
A claim for first-time buyer relief is made on the first LBTT return submitted for the transaction. The amount of LBTT due on the transaction is calculated as follows:
| 0% on the first £145,000 | £0 |
| 2% on the remaining £15,000 | £300 |
| Less First-Time Buyer relief claimed | £300 |
| Total LBTT due on this transaction | £0 |
Black is not due to pay any LBTT as they are entitled to full relief of £300 (although a return must still be filed).
Green purchases a flat above a shop for £185,000 on 1 June 2018 which they will use as their main residence. Green has never owned a dwelling and meets the definition of a first-time buyer.
Green also purchases the shop below the flat from the same seller. As these transactions are linked, Green cannot make a claim for the relief on their LBTT return.
However, if the linked purchase was of the garden or grounds of the flat, or land that subsists or is to subsist for the benefit of the flat, Green could have made a claim for the relief on their LBTT return.
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