Do gifted deposits reduce the LBTT chargeable consideration?

No. A gifted deposit does not reduce the Land and Buildings Transaction Tax (LBTT) you pay on a Scottish home purchase. LBTT is charged on the total chargeable consideration for the property, and the buyer is ultimately responsible for paying it, even where someone else pays or a grant covers part of the purchase price¹. A gift towards your deposit changes who provided the cash, not the price you agreed to pay the seller.

That matters because the tax is worked out on the price, not on your mortgage and not on the money left in your account after the deposit. If you buy at £235,000, the LBTT is £1,800, with £90,000 falling in the £145,001 to £250,000 band at 2%². If you buy at £875,000, the total across the bands is £63,350². Neither figure moves because a relative paid part of the deposit.

A return is needed for most residential purchases where the chargeable consideration is £40,000 or more, and it must be submitted and paid within 30 days of the effective date². Late submission or payment can attract penalties and interest².

A gifted deposit does not reduce the LBTT you pay

The rule is about what is being taxed. LBTT is a tax applied to residential and commercial land and buildings transactions, including commercial properties and commercial leases, where a chargeable interest is acquired⁶. The chargeable consideration is anything given in money or money's worth for the subject matter of the transaction⁷. The price agreed with the seller is the starting point, and the source of the money in your deposit account is not part of that calculation.

A gift is also a distinct legal thing from a loan, which is why lenders ask about it. Where a deposit is gifted, the giver will not require any repayments to be made, has no rights, interests or claims over the property and will not hold any registered legal charge over it⁸. It is an unconditional and non-refundable gift, with no interest charged, no repayments required, no rights or claims in the property, no registered legal charge, and no intention to reside there now or in the future⁸. The money does not need to be given back⁹, and you are not expected to repay the amount to your family member¹⁰.

None of that touches the tax base. The buyer is liable to pay the LBTT due in respect of a chargeable transaction⁵. That liability sits with you whether the deposit came from your own savings, from a gift, or from a combination of the two.

How LBTT is worked out on the consideration paid

LBTT is charged on the consideration for the transaction, and the return asks for it in parts. On the online return, you complete boxes for total consideration, VAT amount, non-chargeable consideration, and the total consideration remaining¹¹. That structure shows the principle: the starting figure is what is paid for the transaction, and anything claimed as non-chargeable is identified separately rather than simply left out.

Where more than one dwelling is bought in a single transaction, the calculation can work differently. Multiple dwellings relief computes LBTT using the average consideration per dwelling, subject to a minimum prescribed amount, which can reduce the tax due⁷. That is a relief with its own conditions, not a general rule about deposits.

The published worked figures show how the bands stack. On a £235,000 purchase, £90,000 falls within the £145,001 to £250,000 band at 2%, giving £1,800². On an £875,000 purchase, the total across the bands is £63,350². Both are calculated from the price alone.

There is a separate rule for companies. LBTT will be charged on the full market value of any land purchased by a company with which the seller is connected, where the consideration involves the issue or transfer of certain shares⁵. That is a narrow anti-avoidance provision, but it makes the same point: the tax follows the transaction, not the payment method.

Residential LBTT bands: nil rate up to £145,000

The residential rates begin with a nil rate band. There is 0% on the portion of the purchase price up to £145,000⁴, and the main LBTT nil-rate threshold is £145,000¹². The 0% band on purchase prices up to £145,000 has applied in Scotland since 1 April 2021¹³.

Above that, the rates step up by band. The published summary of the residential rates sets out 2% on the £145,001 to £250,000 band and 5% on the £250,001 to £325,000 band⁴. The rate you pay on the top slice of the price depends on which band the price reaches, and each band applies only to the portion of the price that falls within it.

Non-residential and mixed-use transactions have their own starting point, with 0% on the portion of the purchase price up to £150,000⁴. That is a different schedule from the residential one and applies to different property types.

Scotland's threshold sits lower than the equivalent in Wales, which is worth knowing if you are comparing costs across nations. Wales sets its general residential nil-rate band at a higher level, £180,000 initially and now £225,000¹². The Welsh non-residential schedule also runs to a £225,000 0% band⁴. If you are buying in Wales rather than Scotland, the tax is Land Transaction Tax and the Land Transaction Tax page covers it.

First-Time Buyer Relief: nil rate band up to £175,000

First-time buyers in Scotland get a higher nil rate band. A relief for first-time buyers increases the residential nil rate band of LBTT to £175,000². If eligible, first-time buyers will not pay LBTT on the first £175,000 of the property's purchase price¹⁴. The Scottish Government describes the change as increasing the residential nil rate band from £145,000 to £175,000 for first-time buyers¹⁵.

The effect is significant. The increased zero tax threshold up to £175,000 meant that an estimated 80% of first-time buyers would not pay any LBTT⁴.

Eligibility turns on your own property history, not on your deposit. Gifted or inherited dwellings are taken into account when determining if an individual is a first-time buyer¹⁴. So a flat you were given, or a share of a home you inherited, can affect whether you qualify, while a cash gift towards a deposit does not.

There is a linked transactions restriction. First-time buyer relief is not available if the transaction is one of a number of linked transactions, except where the linked transaction is the acquisition of garden or grounds land, or land subsisting for the benefit of the dwelling, in which case relief is available on the total consideration of all the linked transactions¹⁷.

The relief is not the only support available to first-time buyers, and the rules differ across the UK. The first-time buyer schemes page sets out what operates in each nation, and who counts as a first-time buyer for property tax covers the definition in more detail.

Who is liable for LBTT when a deposit is gifted

The buyer is liable. That is the statutory position: the buyer is liable to pay the LBTT due in respect of a chargeable transaction⁵. The buyer is also ultimately responsible for the total chargeable consideration even where someone else pays or a grant covers part of the purchase price¹. A gift from a parent does not transfer the tax liability to the parent.

The giver does take on some obligations, though these come from the lender rather than the tax system. To use a gifted deposit you need to fill out a short form signed by the donor verifying it is an unconditional gift, along with evidence of the source of the gift¹⁸. The person gifting money for a house deposit will need to submit proof the deposit monies are available in a UK-based account⁸. If you have been given the deposit as a gift, you will need a letter from whoever gave you the money¹⁹.

There is a threshold that triggers extra work. Should the gifted deposit exceed £100,000, the person gifting the funds will be required to take Inheritance Tax advice, for which they will be responsible for meeting the cost⁸. Separately, a child might need to pay inheritance tax on a gifted deposit if the parent dies within seven years of giving the money²⁰.

If the person giving the deposit owns another home, does the Additional Dwelling Supplement apply?

The Additional Dwelling Supplement is about what the buyer owns, not what the giver owns. If a transaction is notifiable for LBTT, a return must be made to Revenue Scotland within 30 days of the effective date³. Where the supplement applies, it is added to the LBTT due on the purchase.

A relative's property portfolio does not bring the supplement into play on your purchase. Your own ownership position does. If you already own another dwelling, the supplement can apply, and the Additional Dwelling Supplement page explains when it does and when it does not.

There is one lender-side wrinkle worth knowing about if you are using a joint borrower sole proprietor arrangement, where a family member joins the mortgage without going on the title. A non-owning borrower living in the property can be a borrower, but they would not be able to also gift the deposit²¹. That is a lender condition, not a tax rule, but it affects how the funding is structured.

Filing the return and paying within 30 days

The deadline is short. A return must be made to Revenue Scotland within 30 days of the effective date where a transaction is notifiable for LBTT³. You may be charged penalties and interest if you do not submit or pay your tax return on time².

The effective date is normally the date of completion, which is when the transaction takes effect. The 30 days covers both submitting the return and paying the tax, so the two are not separate deadlines. Conveyancers usually handle the return as part of the purchase, but the liability remains the buyer's⁵.

If something goes wrong with the return, it can usually be corrected. A return may be amended in the period of 12 months following the deadline for making it, for example to correct an error⁵. Almost all details can be amended apart from the 'About the return' field, and a conveyance or transfer return cannot be changed to a lease return or the reverse²³. A return originally made in paper format can be amended by sending an email to Revenue Scotland quoting the return reference number, each field to amend, the current entry and the new entry²³. The amend an LBTT return page covers the process step by step.

Where to get help

Revenue Scotland publishes the guidance and the return itself, and its LBTT pages set out the rates, reliefs and filing process⁶. The Land and Buildings Transaction Tax page on this site covers the tax in full, including the rates and bands in each period.

If you are buying in Scotland, the buying a home in Scotland page covers the process from offer to completion, including the Home Report and the point at which an offer becomes binding. The costs of buying a house page sets out the other bills that arrive alongside the tax.

If you are using family money towards the deposit, the gifted deposits page explains what lenders ask for, and can my parents help me buy a home? covers the wider options. Where a family member joins the mortgage rather than gifting cash, gifted deposit or joint borrower sole proprietor compares the two.