New tax to consider when buying land

On 9 October, the Scottish Government announced the proposed rates for Land and Buildings Transaction Tax (“LBTT”) and Scottish Landfill Tax.

LBTT will replace Stamp Duty Land Tax (SDLT) on all Scottish Land Transactions completing on or after 1 April 2015. The suggested rates due to come into play will result in different liabilities applying under LBTT as would be levied under SDLT.

As with SDLT, different rates will apply to residential and non-residential properties. Unlike SDLT, the new Scottish tax LBTT will be progressively applied to the purchase price in a land transaction, unlike SDLT which is a “slab tax”.

Under the proposed rates announced, winners will be those purchasing residential properties under £325,000 and non-residential properties up to £2 million. So for farmers buying farmland less than £2 million, table two below illustrates the reduced tax charge payable under LBTT. Farmland in excess of this will incur a greater tax charge from 1 April 2015.


For example, currently a farmer acquiring a farm at £2.5 million would pay SDLT of £100,000. From 1 April 2015, the LBTT charge on a farm of this value would be slightly greater at £102,750.

On larger scale property purchases the new Scottish tax will be higher than its predecessor. The table below sets out comparatives of LBTT versus SDLT for Residential and Non-Residential Property Prices.

The LBTT rates will, however, have the greatest impact on residential property. For farmers who are looking to sell land for development or who have diversified into activities such as property development, the impact of this higher tax charge on the purchase of residential property in excess of £325,000 will need to be considered.

It will be some time before we know what overall impact this tax increase on residential property prices will have on the market, particularly land for housing.

The rate of LBTT on lease rental of non-residential property remains at the same level as under SDLT, although the scope of LBTT will extend to licences to occupy which are not currently captured by SDLT.

Where farmers in the past have taken on a license to occupy land in Scotland which weren’t previously within the scope of SDLT, they now should take advice as LBTT may now be applicable from 1 April 2015.