Scottish homebuyers pay generous transaction tax

Taxes levied on buying a £500,000 property are £23,350 here compared to £15,000 in England, writes David J Alexander​.

Homebuyers in Scotland are the most generous in the UK and the latest figures prove it. The official statistics for Land and Buildings Transaction Tax (LBTT) show that £753.6 million was collected in 2025, which was a 17.8 per cent increase compared to 2024.

This equates to £2,064,657 collected every day of the year and is £114.1m higher than the figure for the previous year. From July to December 2025 the LBTT recorded its sixth-highest ever monthly revenues, which were all over £70m and twice almost £80m.

The importance of landlords, property investors and second home buyers cannot be overstated as they contributed £235.7m from the 8 per cent Additional Dwelling Supplement (ADS) on top of LBTT – almost a third of the total raised and £68.3m higher than the previous year.

These figures are further evidence of just how crucial this group is in maintaining high levels of taxable income for the Scottish government. The appetite for buying Scottish homes remains undimmed for property investors, landlords and second homeowners despite the disproportionate ADS taxation.

Politicians like to say they will only tax those with the broadest shoulders. In Scotland, this threshold is reached when properties are sold for more than £325,001 when a 10 per cent levy is imposed. This rate is not reached in the rest of the UK until properties are sold for £925,001. This means that the average tax levied per transaction was £20,760. As an example, the taxes levied on the purchase of a £500,000 property are £23,350 in Scotland compared to £15,000 in England. In Scotland, the 20,770 transactions above the £325,001 threshold collected £431.2m, which is 83.3 per cent of the total £517.9m raised in LBTT (the figure for residential sales with the ADS figures removed).

Despite these rising tax revenues, the liveliness of the Scottish market among homebuyers and investors is testament to their appreciation of the housing sector north of the Border. However, it is worth remembering that last year the Institute for Fiscal Studies (IFS), along with many private investors who are desperate to invest in Scotland, stated that the current LBTT policy will, in the long term, reduce investment activity. At a time when there has never been a greater need for more private investment in housing in Scotland this level of taxation is unlikely to encourage financial growth in the long term.

There is also the issue of where this money is being spent. With three quarters of a billion pounds available in just one year there is an opportunity to hypothecate this taxation and ensure it is used to grow the wider housing sector through support for housebuilders, the private rented sector (PRS) and social housing.

Despite the high taxation, Scotland undoubtedly remains a key location for property investors who see the buoyancy of the market, high demand and potential for future growth as an incentive to invest. But if the tax position were relaxed and equivalent to the rest of the UK, who knows how much greater growth would be possible? There is also the question of whether there is a limit to how much the homebuyers and landlords of Scotland are willing to be taxed.