Scottish Budget News - Changes to the Additional Dwelling Supplement

We know, it’s nearly Christmas, and the last thing you probably want to hear about right now is anything to do with Government spending and taxation. However, in light of the Scottish Budget announcement on the 15th of December, there is one change that came into immediate effect that we thought you might be interested in!

It has been decided that there will be an increase in the rate of the Additional Dwelling Supplement from 4% to 6%, effective from the 16th of December 2022. The Scottish Government hopes to raise £34 million pounds through this tax increase alone.

In light of this, our conveyancing team at Watermans have answered some of your questions on this tax increase below.

What is the Additional Dwelling Supplement?

In case you weren’t entirely sure, the Additional Dwelling Supplement (ADS for short) is a tax payable on the purchase of additional residential dwellings in Scotland. You are required to pay this tax if you were to purchase an additional residential property to your main residence, whether it’s an investment passion project, a buy-to-let property, or a second home for you and your family. ADS is paid as part of the Land & Buildings Transaction Tax (LBTT), however all other rates of LBTT will remain unchanged as proposed by the 2023/2024 Budget.

How much is the Additional Dwelling Supplement?

As announced in the Scottish Budget on the 15th of December, the rate of ADS is increasing from 4% to 6%, effective immediately. This tax is payable on the total price of the additional residential property, if it exceeds a purchase price of £40,000.

I bought my additional property before the budget announcement. Do I have to pay 6% ADS?

The Scottish Budget announcement concluded that this increase was to come into effect on Friday the 16th of December. You will not be required to pay the additional 2% if you were concluded in missives by the 16th of December. This means that if your solicitor had entered you into a legally binding contract for the residential property purchase by the 16th of December, the rate of ADS that you will pay will remain at 4%. However, if you were not concluded in missives by the 16th, you are required to pay the increased rate of 6%.

What effect will the increase have on the property market?

It’s expected that the increase in ADS will cause the demand for additional residential properties to fall, slowing down investor purchases in Scotland. However, this could be a welcome consequence for first-time buyers! With a decrease in demand for buy-to-let properties and holiday homes, the property market could end up a little less competitive for those looking to get on the property ladder.


If you have any queries about ADS, or property purchase in general, feel free to contact our team using the form below, or by calling us on 0131 555 7055.

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