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Land and Buildings Transaction Tax update

The Land and Buildings Transaction Tax (LBTT) regime was introduced in Scotland in 2015, replacing the previous stamp duty land tax for the sale or lease of properties in Scotland.

For commercial leases, a change to LBTT payable on rent under commercial leases was announced in the recent Scottish Budget. There is now a new rate of 2% payable where the LBTT calculation taking into account the annual rent over the full term of the lease, is above £2m. This calculation (known as the Net Present Value) is based on a statutory formula and also takes into account Value Added Tax payable on rent, together with any lease premiums or other consideration payable to the landlord at the outset of the lease.

The new 2% rate is therefore designed to increase the tax payable for higher value leases. The transactions which are affected are any Scottish commercial leases entered into after 6 February 2020 (unless there is also a lease contract entered into between the parties’ solicitors prior to 7 February 2020, in which case the previous rates will apply). The new LBTT rates for commercial leases from 7 February 2020 are now therefore as follows:-

Net Present Value  LBTT rate
Up to £150,000 0%
£150,001 to £2m (note: pre-7 February 2020 there was no upper limit to this band) 1%
Over £2m (i.e. new band introduced on 7 February 2020) 2% (i.e. new rate introduced on 7 February 2020)


The new formula for higher value leases has been introduced by the Land and Buildings Transaction Tax (Tax Rates and Tax Bands) (Scotland) Amendment Order 2020, which was approved by the Scottish Parliament last month.

If you require assistance with the grant of a commercial lease, please contact our Commercial Property team on 01383 721621.

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