Tax Explained
Additional Dwelling Supplement (ADS) Explained
The Additional Dwelling Supplement is an 8% surcharge on top of LBTT when you buy an additional residential property in Scotland. It applies to the whole price rather than in slices, which makes it the single largest tax cost in most Scottish buy-to-let and second-home purchases.
Quick answer
What are the key takeaways?
ADS is charged at 8% of the full purchase price for transactions on or after 5 December 2024 (previously 6%).
Key takeaways
ADS is charged at 8% of the full purchase price for transactions on or after 5 December 2024 (previously 6%).
It applies to the entire consideration, not on a slice basis like standard LBTT.
No ADS is due where the consideration is under £40,000.
If you are replacing your main residence, you can reclaim ADS by selling the previous one within 36 months.
ADS is filed and paid to Revenue Scotland alongside the LBTT return, within 30 days of the effective date.
When does ADS apply?
ADS applies when you buy an additional residential dwelling in Scotland and you (or, in most cases, your spouse, civil partner or cohabitant) already own an interest in another dwelling anywhere in the world. That covers buy-to-let purchases, second homes, holiday homes and many purchases made through a company.
It also catches situations people do not expect: buying a new home before selling the old one, inheriting a share of a property, or a parent going on the title of a child's flat to help secure a mortgage. The test is ownership of an interest in another dwelling, not whether you think of yourself as a landlord.
How much is ADS and how is it calculated?
For transactions on or after 5 December 2024, ADS is 8% of the total purchase price. The rate was 6% between 16 December 2022 and 4 December 2024, and any transaction is judged against the rate in force on its effective date.
Unlike standard LBTT, ADS is not banded. It is charged on the whole consideration from the first pound, which is why it dominates the tax cost on additional dwellings. On a £250,000 Glasgow flat bought as a rental, the ADS alone is £20,000 — considerably more than the standard LBTT on the same purchase.
What is the £40,000 threshold?
No ADS is charged where the consideration for the property being purchased is less than £40,000. Where the price reaches £40,000 or more, ADS is charged on the entire amount rather than only the excess.
This is a genuine cliff edge rather than a taper, so it matters at the very bottom of the market — a lock-up conversion or a low-value flat close to the threshold should be checked carefully before contracts are concluded.
How does the 36-month reclaim work?
If you buy a new main residence before selling your previous one, ADS is payable at the time of purchase. You can then claim a repayment if you sell the previous main residence within 36 months of the date of buying the new one, provided the other conditions are met.
The reclaim is not automatic. It has to be claimed from Revenue Scotland, and claims are time-limited, so the sale date and the claim deadline need tracking from the moment the first transaction completes. This is the ADS point most often missed, because the money is recoverable but only if someone remembers to ask for it.
How does ADS fit with the rest of your property tax position?
ADS is a capital cost of acquisition, not a running expense, so it is not deductible against rental profits. It does generally form part of the acquisition cost for capital gains tax purposes when the property is eventually sold.
For anyone building a portfolio, the 8% charge changes the arithmetic of buying at all — it materially raises the yield a property has to achieve to make sense. Modelling ADS, LBTT, mortgage interest restriction and the eventual CGT position together gives a far more honest view than looking at the headline rental yield alone.
Questions
What do people ask about ads?
These answers cover the practical points clients commonly raise before asking Countify to review their own position.
Ask a different question8% of the total purchase price for transactions with an effective date on or after 5 December 2024. It was 6% for transactions from 16 December 2022 until 4 December 2024.
On the whole price. Unlike standard LBTT, which is charged in slices across bands, ADS applies to the entire consideration once the £40,000 threshold is met.
Yes, where you were replacing your main residence and you sell the previous main residence within 36 months of buying the new one. The repayment must be claimed from Revenue Scotland — it is not refunded automatically.
Generally yes. Purchases of residential dwellings by companies are typically within the scope of ADS regardless of whether the company owns another dwelling, so incorporating a portfolio does not avoid the charge.
No. ADS is a capital cost of acquiring the property rather than a revenue expense, so it cannot be set against rental profits. It normally forms part of the base cost for capital gains tax when you sell.
Yes. Countify can calculate the combined LBTT and ADS due, confirm whether a reclaim is available, track the 36-month deadline and model the effect on the return the property needs to make.
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