Commercial and mixed use property in Scotland is taxed at the LBTT non residential rates: 0% on the first £150,000, 1% on the slice from £150,001 to £250,000 and 5% above £250,000. These bands have applied since 25 January 2019. They match the SDLT structure except for the middle band, which is 1% in Scotland and 2% in England, so any Scottish commercial purchase above £250,000 costs exactly £1,000 less than the same price south of the border.

Which purchases count as non residential in Scotland?

Revenue Scotland’s guidance lists commercial property such as shops and offices, forests, agricultural ground that is part of a working farm, and six or more residential properties bought in a single transaction. Section 59 of the Land and Buildings Transaction Tax (Scotland) Act 2013 also treats certain buildings as not used as dwellings, whatever they could be used for:

  • a home or institution providing residential accommodation for children;
  • a hall of residence for students in further or higher education;
  • a care home or institution for people needing personal care;
  • a hospital or hospice;
  • a prison or similar establishment;
  • a hotel, inn or similar establishment.

LBTT4012 adds a registered croft, undeveloped ground (unless a dwelling is being built on it at the effective date) and property so damaged that it is not suitable for use as a dwelling. The test for that last category follows the Mudan decisions on whether defects are capable of remedy.

Borderline cases

Mixed transactions, such as a shop with a flat above, are taxed entirely at the non residential rates (LBTT4011). The use at the effective date decides the classification, and a buyer’s plans for the property are ignored. Revenue Scotland’s guidance shows where the lines fall:

  • Purpose built student flats run by private operators are residential. Only true halls of residence are not.
  • A furnished holiday let is residential even if it pays non domestic rates.
  • A bed and breakfast or guest house depends on the facts, with council tax or non domestic rates status taken into account.
  • Paddocks and grounds are residential unless there is evidence of regular commercial use, such as farming, a grazing agreement for payment or a registered croft.
  • A home office does not make a house mixed use, but a house partly converted into a surgery can be.

Revenue Scotland expects evidence such as non domestic rates, VAT registration, licences or business accounts to support a non residential return.

How are the bands applied?

Slice of the price LBTT rate
Up to £150,000 0%
£150,001 to £250,000 1%
Above £250,000 5%

Each rate applies only to the part of the price inside its band. Revenue Scotland’s own examples: a £465,000 purchase gives £1,000 plus 5% of £215,000, a total of £11,750, and office premises bought for £872,000 give £1,000 plus £31,100, a total of £32,100. A return is required for any purchase of £40,000 or more, even below the nil rate band. The filing rules and penalties are explained in LBTT returns and deadlines.

Does VAT on the price increase the tax?

Yes. Schedule 2 paragraph 2 of the 2013 Act, as explained at LBTT2002, includes any VAT chargeable on the transaction in the chargeable consideration. The exception is where the seller could opt to tax but has not done so by the effective date: VAT that only becomes payable after that date is left out. This is one reason the timing of an option to tax deserves attention before completion.

Illustration only. Offices are sold for £400,000 plus VAT at the standard rate of 20%, so £480,000 in total. LBTT on £400,000 would be £1,000 plus 5% of £150,000, which is £8,500. On £480,000 it is £1,000 plus 5% of £230,000, which is £12,500. The VAT adds £4,000 of LBTT, and that LBTT is not recovered even if the VAT itself is.

How does LBTT compare with SDLT on the same price?

SDLT on non residential property in England and Northern Ireland uses 0% to £150,000, 2% on the next £100,000 and 5% above £250,000. The only rate difference is the middle band.

Price LBTT (Scotland) SDLT (England)
£200,000 £500 £1,000
£465,000 £11,750 £12,750
£1,000,000 £38,500 £39,500
£5,000,000 £238,500 £239,500

The procedural differences carry more weight than the £1,000. The LBTT return and payment are due within 30 days rather than the 14 days allowed for SDLT. Rent under a commercial lease is taxed on its net present value with a 1% band running from £150,001 to £2,000,000, where SDLT’s 1% band runs to £5,000,000, and Scottish leases need a return every three years under Schedule 19. Those rules are covered in LBTT on non residential leases, and the English side in SDLT on commercial property purchases. Welsh rates, which have a 6% top band, are compared in LTT on commercial property in Wales.

What if the purchase includes a home?

A mixed purchase still uses the non residential bands for the whole price, but the Additional Dwelling Supplement can apply to the residential part. LBTT4011 says the supplement is calculated on a just and reasonable apportionment of the price to the dwelling, applies where that part is £40,000 or more, and is charged at the flat 8% rate on top of the non residential LBTT. It only bites where the buyer would otherwise pay it, for example an individual who already owns a home, or any company.

Illustration only. A buyer who already owns a home pays £591,000 for a pub with a flat above, apportioned £392,000 to the pub and £199,000 to the flat. LBTT on the whole price at non residential rates is £1,000 plus 5% of £341,000, which is £18,050. The supplement is 8% of £199,000, which is £15,920. The total due is £33,970. The company position is explained in the Additional Dwelling Supplement for companies.

What about buying six or more dwellings?

Six or more separate dwellings bought in a single transaction are treated as non residential, so the bands above apply. LBTT4012 notes that multiple dwellings relief can still be applied to such a transaction, and Revenue Scotland gives 100% relief from the supplement on such a purchase. Splitting the same flats across two smaller transactions loses that treatment.

Which dates decide the rates that apply?

The current bands apply to transactions with an effective date on or after 25 January 2019. Where the contract was entered into before 12 December 2018, the earlier bands (3% from £150,001 to £250,000 and 4.5% above) still applied, and the agent had to overwrite the figure calculated by SETS. Few such contracts remain open, but the pattern repeats with each Scottish budget change: the contract date as well as the settlement date has to be recorded on the return.

What mistakes come up most often?

  • Applying the English 2% middle band to a Scottish purchase.
  • Claiming non residential rates for paddocks or outbuildings with no evidence of commercial use.
  • Relying on the buyer’s intended use rather than the use at the effective date.
  • Leaving VAT out of the chargeable consideration.
  • Forgetting the supplement on the flat in a mixed purchase.
  • Treating private student accommodation as non residential.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.