Tax Guide to Buying Property In Scotland: What Homebuyers Need to Know

Purchasing a home is one of the biggest financial commitments you will ever make, and among the associated costs of buying a property, you need to consider the taxes. Tax is a major consideration when buying a new home. Here we have taken a look at some of the main tax issues in Scotland you should take into account.

Land and Buildings Transaction Tax (LBTT)

LBTT replaced Stamp Duty in Scotland and applies to residential property purchases over £145,000 (or £175,000 for first-time buyers). The tax rates are:

• 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%

Example: If you’re a first-time buyer purchasing a new home for £200,000, the first £175,000 is tax-free due to first-time buyer relief, and the remaining £25,000 is taxed at 2%, resulting in an LBTT of £500. You can use the LBTT calculator to work out the amount of LBTT payable.

The LBTT is a fully devolved tax, meaning the Scottish Government is responsible for setting the rates. Announcements made by the UK Government regarding stamp duty do not apply in Scotland.

Capital Gains Tax (CGT) on Property Sales

While CGT does not apply when selling your main residence, it is charged on profits from selling a second home, rental property, or investment property.

CGT Rates on Property in Scotland:

Basic rate taxpayers (income under £50,270) – 18%

Higher rate taxpayers (income over £50,270) – 24%

Example: If you bought a second home for £250,000 and sold it for £300,000, your gain is £50,000. After deducting the £6,000 CGT allowance, the taxable gain is £44,000. If you’re a higher-rate taxpayer, you would owe £10,560 in CGT.

Individual Income Tax & Buy-to-Let Tax

If you rent out a property you own in Scotland, the rental income is subject to Scottish Income Tax, which has its own tax bands:

Up to £12,570 – 0% (Personal Allowance)

£12,571 – £14,732 – 19%

£14,733 – £25,688 – 20%

£25,689 – £43,662 – 21%

£43,663 – £75,000 – 42%

Over £125,140 – 47%

Note: Landlords can deduct mortgage interest and property expenses before tax is calculated. You can always use the official Income Tax Calculator to estimate how much Income Tax and National Insurance you should pay for the current tax year.

VAT on New Builds

When buying a newly built home from a developer, VAT is 0%, meaning it does not apply. However, VAT may apply to services like architect fees, renovations, or self-build projects, so make sure to check the official Land and Property (VAT Notice 742) page.

Council Tax

After purchasing your home, you’ll need to pay Council Tax, which varies by local authority. The funds gathered from council tax payments support local services, including waste and recycling collection and maintenance of the area.

Final Thoughts

Understanding these taxes ensures you’re financially prepared when buying a new home in Scotland. Whether you’re a first-time buyer, investor, or relocating, knowing your obligations helps you be prepared and avoid unpleasant surprises. Always consult with a conveyancer or tax advisor for personalised advice.

Looking for a new home? Explore Muir Homes’ latest developments for new-build homes in Scotland.