With effect from 25 January 2019, the rate of Additional Dwelling Supplement (ADS) rose from 3% to 4%.
ADS was introduced in 2016 for people buying an additional residential property over and above their main home. The ADS is an additional LBTT charge of (now) 4% which is charged on the total consideration for the property, and must be paid in addition to the normal rates of LBTT.
The rules on when the ADS is payable are not straightforward and catch more purchases than one would imagine. ADS is only payable on a dwelling if the chargeable consideration for it is £40,000 or more. However once the £40,000 threshold is crossed the entire consideration attributable to the dwelling is taxed at 4%.
This means that the general ADS rate for purchases in Scotland is higher than the English equivalent (Higher Rate for Additional Dwellings).
Finance secretary David Mackay used his Budget to suggest that raising ADS would help first-time buyers: “As well as building more houses we are continuing to protect those buying their first home and progressing through the property market with our progressive land and buildings transaction tax. But for those purchasing additional properties I am proposing to increase the Additional Dwelling Supplement from 3% to 4%.”
David Alexander, managing director of property management firm DJ Alexander, disagrees: “Although many will believe that those buying second properties can afford any level of tax that the Scottish Government wishes to impose on them, the truth is that increasing the rate of this tax at a time when many landlords are exiting the private rented sector market could have serious implications. Although Mackay undoubtedly sees this as a progressive tax on wealth, the results could be the loss of a substantial part of the private rented sector which is not being replaced in any meaningful way with social housing”.
LBTT and ADS calculators
Revenue Scotland have amended their ADS calculators on their website to take into account the new rates: https://www.revenue.scot/land-buildings-transaction-tax/tax-calculator/lbtt-property-transactions-calculator
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