Our recent review of Scotland’s Land & Buildings Transaction Tax (LBTT) shows that, in 2022/23, LBTT revenue reached a record high in Scotland, driven by a relatively strong sales market and rising prices.
63% of Scottish house sales are now over the minimum £145,000 threshold on which LBTT has to be paid. This is the highest proportion of eligible transactions since the introduction of the tax in 2015/16.
Revenue Scotland forecast LBTT receipts to contract by 16% in 2023/24.
LBTT revenue generated by new build sales is now over £100 million per annum, with the house building sector potentially paying up to £10 million a year directly in LBTT payments.
Edinburgh generates an estimated 27% of LBTT revenue from 11% of Scotland’s house sales, while, nationally, sales over £750,000 generate over 22% of LBTT from around 1% of transactions.
The 2022/23 financial year saw LBTT revenue reach record levels, driven by rising prices and a relatively strong sales market. As house prices have risen, almost two-thirds of sellers will now be subject to LBTT.
While recent LBTT receipts have benefitted from an active sales market, the impact of the cost-of-living crisis, including rising mortgage costs, means that Revenue Scotland is forecasting LBTT to contract by 16% in 2023/24 as the market is expected to cool off.
Revenue from the Additional Dwelling Supplement (ADS), which is a tax on second homes and empty homes, is forecast to increase in 2023/24 by 6%. However, given the recent increase in the ADS rate and the recently announced potential for councils to increase Council Tax rates on second homes , this Revenue Scotland forecast does seem ‘rosy’.
New build properties are an important source of LBTT revenue. Despite accounting for only 14% of transactions in Scotland in 2022/23, new build property sales generated an estimated 24% of LBTT revenue.
In total, the housebuilding sector generates over £100 million in LBTT receipts per annum for the government. And with many homebuilders currently offering incentives involving the payment of LBTT, a significant proportion of this revenue is effectively being funded directly by the sector itself.
Edinburgh generated an estimated £128 million of LBTT revenue (27% of the national total) in 2022/23. The average LBTT bill in Edinburgh was £11,720, compared to £3,288 in Glasgow and £3,062 in Aberdeen.
To give some insight, in 2022/23 a third of sales were above the £250,000 band (up from 16% when the tax was first introduced). In total, around 95% of LBTT revenue now comes from house sales over £250,000 and 22% from transactions over £750,000.
ADS was increased to a rate of 4% in 2019/20. Following this increase, ADS revenue fell by 6.3% (from £117.4 million to £110 million).
The postcodes that generated the most revenue in 2022/23 were EH4 (including Barnton and Cramond), EH10 (including Morningside), EH12 (including Murrayfield), EH3 (including the Edinburgh New Town) and G77 (including Newton Mearns). The highest average LBTT bill by area was in East Lothian in EH31 (including Gullane) at £37,000, followed by the southside of Edinburgh (EH10) at £28,000 and North Berwick (EH39) at £27,000. You can find more detail can be found by downloading the full Rettie report.
See our LBTT Calculator and Guide webpage for comprehensive resources on the Land and Buildings Transaction Tax (LBTT), applicable to property transactions in Scotland. The page features a calculator to help you estimate LBTT based on the value of your property. It also provides an in-depth explanation of LBTT rates, outlines who is liable for the tax, and includes examples of tax calculations. Furthermore, you can find links to download our detailed LBTT guide.
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