The Additional Dwelling Supplement (ADS)

Check if you need to pay the Additional Dwelling Supplement (ADS) when you buy a residential property in Scotland.

For a more detailed explanation of ADS please see the LBTT10010 - ADS technical guidance.

Revenue Scotland is responsible for managing and collecting devolved taxes, the Scottish Government is responsible for setting tax policy. If you have any concerns about the policy or legislation in place, you may wish to write to your MSP or the Scottish Government to highlight these concerns. Please note that the Scottish Government cannot consider appeals in relation to individual tax cases or amend the rules on the application of the legislation on an ad-hoc basis.

Contents

What is the ADS

The ADS is an additional charge which is added to any Land and Buildings Transaction Tax (LBTT) which may be due. It is charged if you buy an additional residential property (dwelling) in Scotland.

Examples of an additional residential property:

  • a second home
  • a rental property
  • a holiday home
  • properties used by family and friends even if you don’t charge rent

When does the ADS apply

You will usually pay ADS when:

  • you buy a residential property in Scotland and you already own one or more residential properties anywhere in the world
  • if there are two or more buyers: if any buyer already owns one or more residential properties anywhere in the world
  • you are not replacing or selling your ‘only or main’ residence

Each residential property is only counted if it has a value of £40,000 or more.

The ADS applies to most purchases of residential property in Scotland by non-natural persons, known as non-individuals for example corporate bodies, companies and certain trusts.

Examples when the ADS applies

Main residence owner purchasing first rental dwelling 

Red already owns a dwelling which is their main residence and is purchasing a dwelling that will be used to rent out. At the end of the day that is the effective date of the transaction, Red owns two dwellings and has not replaced their main residence, so the ADS will apply.

Company purchasing first dwelling

Orange Limited currently operate out of rented premises. The company decides to purchase a dwelling to generate buy-to-let income. At the end of the effective date, the company owns only one dwelling.
However, as long as the relevant consideration for the transaction is £40,000 or more, each purchase of a dwelling that a company makes is subject to the ADS. Therefore, the ADS will apply.

Company purchasing first dwelling with an individual

Orange Limited currently operate out of rented premises. The company decides to purchase a dwelling to generate buy-to-let income jointly with Blue. Blue does not own any properties. At the end of the effective date, the company owns only one dwelling. However, as long as the relevant consideration for the transaction is £40,000 or more, each purchase of a dwelling that a company makes is subject to the ADS. Therefore, the ADS will apply.
Despite not already owning a property, Blue would be jointly responsible for paying the ADS as they are jointly buying property with a company, for which the ADS will always apply.

When does the ADS not apply

The ADS will not apply:

  • if you only own one dwelling at the end of the effective date
  • the property has a value of less than £40,000
  • you have replaced your only or main residence in the 18 months before you purchase your new main residence

Examples when the ADS does not apply

Two dwellings, replacement of PMR within 18 months

In June, Red sells their MR (House 1). Red also owns a holiday home (House 2).

Since the sale of their PMR, Red has been living in rented accommodation but still owns their holiday home.

In February, Red purchases a dwelling (House 3) which they intend to use as their NMR. They move out of their rented accommodation. Red still owns a holiday home (House 2). At the end of the effective date, Red owns two dwellings, but as they have replaced their PMR (House 1) in the previous 18 months and they intend to live in the NMR as their only or main residence (House 3), the ADS will not apply.

Consideration less than £40,000

Purple owns a dwelling which they use as a main residence. they then purchase a dwelling for £25,000 which they will rent out.
At the end of the day that is the effective date of the transaction, although Purple owns two dwellings, as the consideration for that transaction is less than £40,000, the ADS will not apply.

Can I claim an ADS repayment

You can claim a repayment if:

  • a) you sell your previous property within 18 months of the date of buying your new one;
  • b) the property you sold was your only or main residence at any time in the 18 months before you bought the property that you paid the ADS on;
  • c) you have lived in the property you paid the ADS on as your only or main residence.

If all buyers have done all of these things a repayment claim can be made.

For spouses, civil partners and co-habitants there are special rules where only one buyer needs to meet point a) but both must meet b) and c)

Please see technical guidance for more information.

Claiming an ADS repayment during COVID-19 period

For purchases between 24 September 2018 and 24 March 2020, the 18 month window to sell a previous main residence was extended to 36 months.

Examples 

No ADS repayment - NMR sold within 18 months

Blue is selling their PMR (House 1) and purchasing their NMR (House 2). However, due to mortgage complications, the sale of their PMR is delayed. The purchase of House 2 goes ahead on the intended date. At the end of the effective date, Blue owns two dwellings and has not replaced their PMR. The ADS will apply. Despite recently buying House 2, due to personal circumstances, Blue sells House 2. This has taken place within the 18 month period beginning the day after the effective date for House 2, but it is a house other than that which formed part of the subject-matter of the chargeable transaction that needs to be sold for the ADS repayment conditions to apply. Blue will not be able to claim a repayment of the ADS previously paid.

Co-habitants - one owned PMR, both purchase NMR

Red and Green live together in their main residence (House 1), solely owned by Red. They are cohabitants. In July, they decide to jointly purchase a property (House 2) which will replace their PMR. However, the sale does not go through on time and at the end of the effective date, Red will own two dwellings (and Green will be deemed to own two dwellings). The ADS will apply as they own more than one dwelling and have not replaced their PMR. Six months later, the PMR sells. A repayment of the ADS can be claimed as one of the buyers has replaced a dwelling that they owned within an 18 month period, both buyers lived in that PMR as their main residence and both intend to live in the NMR as their only or main residence.

Civil partners - both buyers did not live in PMR sold

Purple owns their current main residence (House 1), but will soon be buying a NMR with their civil partner, Blue. Blue currently lives in separate rented accommodation. Purple cannot sell their MR before the joint purchase takes place in August. Therefore, at the end of the effective date of the transaction, Purple owns two dwellings and has not replaced their PMR. Therefore, the ADS will apply. Blue is also deemed to own two dwellings by virtue of the economic unit provisions. Purple sells their PMR five months later and they now wish to claim a repayment of the ADS paid. Although a PMR has been replaced, both buyers did not occupy House 1 as their PMR, so the repayment conditions have not been met and a repayment cannot be claimed.

How to pay or claim an ADS repayment

You calculate the ADS alongside your Land and Buildings Transaction Tax (LBTT). You include it on the LBTT return and pay at the same time as your LBTT.

There are different options to claim an ADS repayment depending on whether you are claiming it as a taxpayer or using an agent to claim it on your behalf.

Find out how to claim an ADS repayment if you are a taxpayer or agent.

ADS rates and interest

For transactions on or after 16 December 2022 the ADS is 6% of the purchase price.

For transactions on or after 25 January 2019 the ADS is 4% of the purchase price.

For transactions prior to 25 January 2019 the ADS was 3% of the purchase price.

Draft LBTT returns

If you started a draft tax return prior to 16 December 2022 for:

  • A tax return where the effective date is 15 December 2022 or earlier: the draft can be submitted as the ADS will have been calculated at 4%.
  • A tax return where the effective date is 16 December 2022 or later will need to be recalculated for the system to refresh the ADS to calculate at 6%.
  • A tax return where the effective date is 16 December 2022 or later where the contract is prior to the 15 December 2022: please check the calculation if required you can make a manual adjustment to the SETS calculation by clicking ‘Edit transaction details’ in the ‘About the transaction’ section of the return.

Please check the expected ADS result prior to submission.

Interest on repayments

Current rates - the higher of 0.5% per annum and the Bank of England Base Rate.

Use the LBTT calculator to work out how much tax you’ll pay.

Calculate tax