Land & Buildings Transaction Tax (LBTT) Briefing July 2024

As we have passed the close of the financial year, it is time to take our annual delve into the performance of Scotland's Land & Buildings Transaction Tax (LBTT), in order to see how returns and receipts have performed across 2023/24 compared with previous years.

Invariable, property tax is a dry subject, but we have unearthed some interesting nuggets of information in what is one of Scotland's few fully devolved tax raising powers. Around 65% of sales are now over the £145,000 threshold, meaning almost two-thirds of Scottish house buyers can expect an LBTT bill. This means that LBTT continues to have a significant effect on the performance of our housing market.

Key findings explored.

Two-thirds of house sales now pay LBTT

Residential LBTT revenues decreased slightly in 2023/24 compared with the previous year. When LBTT was introduced in 2015/16, over 50% of transactions fell under the £145,000 threshold. However, as house prices have risen, only 35% of sales are now under this threshold.

In 2023/24, a third of sales were above the £250,000 band, up from 16% when the tax was first introduced. This ‘fiscal drag’ means that around 95% of LBTT revenue now comes from house sales over £250,000 and 23% from transactions over £750,000.

Recovery in count of receipts at end of 2023/24

While the count of LBTT receipts dropped back YoY in the final months of 2023, activity picked up slightly at the start of 2024, with the count in April 2024 up 10% on April 2023. This trend has continued into May 2024, with the count up 7% on May 2023, indicating a slow housing market recovery.

ADS revenue is climbing

Residential LBTT revenue has fluctuated in recent years due to fluctuations in the housing market. However, since ADS was raised from 4% to 6% for second home transactions (taking place after 16th December 2022), the revenue generated by ADS has noticeably increased.

Geography lessons

Analysis of residential LBTT revenues by geography highlights some interesting trends across the country. In 2023/24, six of the top ten revenue generating postcodes were in Edinburgh, while three were in Glasgow. KY16, which includes St Andrews, is the only postcode district outside of the two major cities within the top ten. Total residential LBTT revenue from the capital is estimated to be over £109 million in 2023/24 compared to the next highest area, Glasgow, which generated c.£47 million.