What is the Additional Dwelling Supplement in Scotland and who pays it?

Full answer

The Additional Dwelling Supplement is the Scottish equivalent of the higher rates for additional properties charged in England and Northern Ireland, though the Scottish rate and some of the specific rules differ. **The rate and how it applies** ADS is charged at 8% of the FULL purchase price of an additional residential property (not just the amount above a threshold), on top of the standard LBTT rates and bands that would otherwise apply -- this makes it a significant extra cost for buy-to-let investors and second home buyers in Scotland, calculated on the whole price rather than a marginal slice. **When ADS applies** ADS generally applies if, at the end of the day of completing a residential property purchase, you (or your spouse/civil partner, if applicable) own two or more residential properties anywhere in the world, and you are not replacing your only or main residence -- buying a second home, holiday home, or additional buy-to-let property while retaining your existing main home typically triggers ADS. **Worked example** Someone already owns their main home in Edinburgh and buys a second flat in Glasgow for £180,000 to let out. Alongside standard LBTT (which for a £180,000 purchase would ordinarily be a modest amount within the standard bands), they must also pay ADS of 8% x £180,000 = £14,400 as an additional charge, making the total transaction tax substantially higher than for someone buying their only or main residence at the same price. **Replacing your main residence -- ADS may not apply** If you are selling your existing main home and buying a new one to replace it, ADS generally does not apply even if, for a short overlapping period, you technically own both properties at once (for example, if you complete on the new home before selling the old one) -- provided the previous main residence is sold within a set period (usually 18 months) after buying the new one, you can reclaim any ADS paid, since the situation is treated as replacing your main residence rather than acquiring an additional property. **Reclaiming ADS** If you initially pay ADS because you temporarily owned two properties (for example, buying your new main home before selling your old one), and you then sell your previous main residence within the qualifying period, you can apply to Revenue Scotland for a refund of the ADS paid on the new purchase, since the situation retrospectively qualifies as a main residence replacement rather than an additional property purchase. **First-time buyers and ADS** ADS can still apply to someone who might otherwise qualify for first-time buyer relief on standard LBTT rates, if they are buying an additional property (for example, alongside a property they already own, perhaps inherited or jointly owned) -- first-time buyer relief on the standard LBTT rates and the ADS charge are assessed somewhat separately, so it is possible to face ADS despite never previously having bought a main home in your own right. **How ADS compares with England's equivalent surcharge** England and Northern Ireland charge a broadly similar (though not identical in rate or exact rules) additional property surcharge on SDLT, while Wales has its own version through Land Transaction Tax -- buyers with properties in different UK nations should check the specific rules for the nation where they are buying, since ADS, the SDLT surcharge, and the Welsh equivalent are separate systems with their own detailed conditions. **Practical tip** If you are buying an additional property in Scotland, or temporarily own two properties during a main residence move, get a clear calculation of any ADS due (and whether a refund may later be available) before completing the purchase, since this 8% supplement can be a very substantial additional cost that is easy to underestimate when budgeting for a purchase.

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