Although commonly referred to as stamp duty in everyday conversation, in Scotland, the property transaction tax is officially called the Land and Buildings Transaction Tax (LBTT). Here’s everything you need to know about how it works, how much you might pay, and what’s changing.
What Is LBTT?
LBTT has replaced Stamp Duty Land Tax (SDLT) in Scotland since 1 April 2015. It’s a progressive tax applied to both residential and non-residential property transactions—meaning you pay different rates on different portions of the purchase price.
LBTT Rates and Bands (2025–26)
Based on the Scottish Budget for 2025–26, here are the current residential LBTT bands:
- Up to £145,000 – 0%
- £145,001 to £250,000 – 2%
- £250,001 to £325,000 – 5%
- £325,001 to £750,000 – 10%
- Over £750,000 – 12%
First-Time Buyer Relief
First-time buyers benefit from a higher tax-free threshold, increasing the nil rate band from £145,000 to £175,000—a valuable relief worth up to around £600.
Additional Dwelling Supplement (ADS)
If you’re buying an additional residential property—such as a second home or buy-to-let property—and the purchase price is £40,000 or more, an Additional Dwelling Supplement (ADS) of 8% applies to the entire purchase price. This charge is on top of the standard LBTT.
In April 2025 alone, ADS revenues reached £23.6 million, underscoring its impact on Scotland’s property market.
Example Calculations
Example 1: Residential Purchase – No ADS
Buying a home for £300,000 (main residence):
- 0% on first £145,000 → £0
- 2% on next £105,000 → £2,100
- 5% on remaining £50,000 → £2,500
Total LBTT = £4,600
Example 2: Additional Property (ADS Applies)
Buying a second home for £300,000:
- Standard LBTT: £4,600 (as above)
- ADS: 8% of £300,000 = £24,000
Total Payable = £28,600
Why It Matters
LBTT is designed to be fairer and more progressive than the older SDLT system. However, the ADS—especially at its elevated 8% rate—has attracted scrutiny. Critics, including the Institute for Fiscal Studies (IFS), argue it may raise barriers for landlords and push up rents, potentially affecting tenants and limiting mobility in the rental market.
Summary Table
| Scenario | Purchase Price | LBTT (Standard) | ADS | Total Tax Payable |
| Main residence | £300,000 | £4,600 | £0 | £4,600 |
| First-time buyer (same price) | £300,000 | Lower (nil band to £175k) | — | Slightly less |
| Second home / Buy-to-let property | £300,000 | £4,600 | £24,000 | £28,600 |
How to Use This Information
- First-time buyers should explore the £175,000 nil rate benefit.
- Buy-to-let investors must account for the ADS when estimating total costs.
- Estate agents and advisors should clearly communicate how LBTT and ADS apply in different scenarios.
- Policy watchers may want to follow ongoing debates around LBTT, ADS, and broader property taxation reform in Scotland.