Scottish Budget 2020/21 - increase to LBTT rate for non-residential leases

Kate Forbes, Minister for Public Finance and Digital Economy, announced an increase of LBTT from 1% to 2% on certain non-residential (commercial) property leases, with effect from 7 February. The increase comes into force the day after the Budget announcement, but is still subject to Royal Assent.

The change will apply to new leases where the “net present value” of rental income payable over the period of the lease is above £2 million. Under transitional rules, the changes will not apply where a contract for a new lease was entered into prior to 6 February 2020. For example, if missives of let were entered into on 31 January 2020 and the lease commenced with an effective date of 29 February 2020, LBTT would be calculated using the rates in force prior to 6 February 2020.

Similarly, the new rules will not apply to existing leases where the effective date was between 1 April 2015 and 6 February 2020 in circumstances where further LBTT returns are required (e.g. 3 year review, assignment, termination).

LBTT rates for non-residential leases up to 6 February 2020
NPV of rent payableLBTT Rate
Up to £150,0000%
Above £150,0001%


LBTT rates for non-residential leases on or after 7 February 2020
NPV of rent payableLBTT Rate
Up to £150,0000%
Above £150,000 to £2,000,0001%
Above £2,000,0002%

By way of example, the total LBTT payable in relation to a 10 year commercial lease (rent £300,000 per year) with an effective date before 7 February 2020 was £23,449. LBTT payable on a new lease on similar terms effective date after on or after 7 February 2020 would increase to £28,399, an increase of almost £5,000.

The change in rate is forecast to generate an additional £11 million per annum in tax revenue for the Scottish Government going forward.

No changes are proposed to the rate of LBTT payable on lease premiums or other non-residential rates of LBTT. Similarly, existing residential LBTT rates and bands will remain unchanged. The Additional Dwelling Supplement payable on the purchase of additional residential properties in Scotland with a value of £40,000 or more (e.g. buy to let properties and second homes) will remain at 4%.

The Scottish Government also plans to publish a consultation on draft legislation in respect of two targeted LBTT reliefs relating to Property Authorised Investment Funds (PAIF) and Co‑owned Authorised Contractual Scheme (CoACS).