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

This guidance has been updated to take account of legislative changes as of 1 April 2024. 

Changes have been made to the Additional Dwelling Supplement (ADS) legislation which affect transactions with an effective date on or after 1 April 2024. For example if you buy a new main residence on or after 1 April 2024 the new rules, including the extended 36 month time limits will apply. The new rules will not apply if you bought your new main residence before 1 April 2024.

What is the Additional Dwelling Supplement (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 can include:

  • 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

and

  • you are not replacing or selling your ‘only or main’ residence

A residential property is only counted if your share value is £40,000 or more. 

Before 1 April 2024, where you own a share in a jointly owned property, it will count if the value of the whole property is £40,000 or more. 

For transactions with an effective date from 1 April 2024, a share in a jointly owned property will only be counted if the value of the individual share is £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, even where they have no other residential properties.

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

or

  • the consideration (amount payable) for the property being purchased is less than £40,000

or

  • you own an additional property, but its value is less than £40,000

or

  • you have disposed of your only or main residence in the 18 months before you purchase your new main residence

For transactions with an effective date on or after 1 April 2024, the ADS will not apply if: 

  • you only own one dwelling at the end of the effective date

or

  • the consideration payable for the property is less than £40,000

or

  • you own an additional property, but that property has a value less than £40,000

or

  • you own a share in a jointly owned property and the value of your share is less than £40,000, or
  • you have disposed of your only or main residence in the 36 months before you purchase your new main residence

Examples have been updated to show the timelines etc for transactions with effective dates from 1 April 2024

Examples when the ADS does not apply

Two dwellings, replacement of Previous Main Residence (PMR) within 36 months

In June, Red sells their Main Residence (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 New Main Residence (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 Red as disposed of their PMR (House 1) in the previous 36 months and they intend to live in the New Main Residence (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 36 months of the date of buying your new one;

and

  • b) the property you sold was your only or main residence at any time in the 36 months before you bought the property that you paid the ADS on;

and

  • c) you have lived in the property you paid the ADS on as your only or main residence.

Where there are joint buyers, If all buyers meet all of these conditions 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)

For transactions with an effective date on or after 1 April 2024 only one of the buyers will be required to meet conditions a) and b) however both must meet condition c). 

For transactions up to and including 31 March 2024, the 36 months is an 18-month period.

Note: In cases where repayment conditions are not met.

Revenue Scotland is unable to consider any exceptional circumstances.

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 -  New Main Residence (NMR) sold within 36 months

Blue is selling their Previous Main Residence (PMR) (House 1) and purchasing their New Main Residence (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 36 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 Previous Main Residence (PMR), both purchase New Main Residence (NMR)

Red and Green live together in their main residence (House 1), solely owned by Red. They are cohabitants. In July, they decide to sell their current main residence (House 1) and 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, of the purchase of the NMR, Red will own two dwellings (and Green will be deemed to own two dwellings). The ADS will apply as Red and Green own more than one dwelling and have not replaced their PMR. Six months later, Red sells the PMR. A repayment of the ADS can be claimed as one of the buyers has replaced a dwelling that they owned within an 36 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 Previous Main Residence (PMR)

Purple owns a current main residence (House 1), but will soon be buying a New Main Residence (NMR) with their new civil partner, Blue. Blue currently lives in separate rented accommodation. Purple cannot sell their Previous Main Residence (PMR) 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 the PMR five months later and they now wish to claim a repayment of the ADS paid. As one of the buyers disposed of a PMR the repayment conditions have been met, and a repayment of the ADS can be claimed. Both buyers are not required to have lived in the PMR.

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.

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