How is Land and Buildings Transaction Tax (LBTT) calculated under section 25?

LBTT is calculated using a progressive 'slice' system. In Step 1, each portion of the chargeable consideration falling within a tax band is multiplied by that band's rate. In Step 2, all amounts from Step 1 are added together to give the total LBTT due. Only the portion within each band is taxed at that rate, not the entire price.

What does the progressive or slice approach mean for LBTT?

The progressive or slice approach means each portion of the purchase price is taxed at the rate for the band it falls within. For example, the first slice may be taxed at 0%, the next at 2%, and higher portions at higher rates. You never pay the highest rate on the entire price — only on the amount exceeding lower thresholds.

How does LBTT apply to lease transactions involving rent?

Where the chargeable consideration consists wholly or partly of rent, the standard section 25 calculation is modified by Schedule 19. That schedule contains detailed provisions for applying LBTT to the rental element of lease transactions, including calculating the net present value of rent over the lease term.

What reliefs and additional charges can modify the standard LBTT calculation?

Several schedules modify the standard calculation. Schedule 2A imposes the Additional Dwelling Supplement on second homes and buy-to-let purchases. Schedule 4A provides first-time buyer relief. Schedule 5 covers multiple dwellings relief. Schedule 9 provides crofting community right to buy relief. Schedule 10A provides sub-sale development relief, and Schedule 11 Part 3 provides acquisition relief for corporate transactions.

Land and Buildings Transaction Tax (Scotland) Act 2013 section 25

Amount of tax chargeable

Section 25 explains how to calculate the amount of Land and Buildings Transaction Tax (LBTT) due on a chargeable transaction, using a progressive tax band structure, and identifies the schedules that may modify the standard calculation.

LBTT is calculated by applying the relevant tax rate to each portion of the chargeable consideration that falls within each tax band, then adding the results together (a progressive or "slice" system).
Where the chargeable consideration consists wholly or partly of rent (i.e. lease transactions), the standard calculation is modified by the rules in Schedule 19 dealing with leases.
The standard calculation may also be modified by reliefs and additional charges, including the Additional Dwelling Supplement for second homes (Schedule 2A), first-time buyer relief (Schedule 4A), multiple dwellings relief (Schedule 5), crofting community right to buy relief (Schedule 9), sub-sale development relief (Schedule 10A), and acquisition relief (Part 3 of Schedule 11).
The progressive band structure means that only the portion of the price falling within each band is taxed at that band's rate — not the entire price — so higher rates apply only to the amount above each threshold.

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