Increase in Additional Dwelling Supplement damning for property sector

We were disappointed with the Scottish Government’s announcement in the 2025-26 Budget on Wednesday that the Additional Dwelling Supplement (ADS) will increase from six percent to eight percent overnight.

Shona Robison, Scotland’s Cabinet Secretary for Finance and Local Government, outlined the budget plans for the year ahead, which included a number of measures aimed at investing in more affordable homes with a target of 8,000 new properties for social rent, mid-market rent and low-cost home ownership.

However, details also emerged to increase the tax supplement on purchases of second homes from six percent to eight percent. This substantial rise has been brought in with no notice, impacting many property transactions as purchasers now have to find an additional two percent of the property transaction cost overnight.

A typical two bed flat in Leith, an area popular with buy-to-let investors, commanded an ADS bill of approximately £14,792 on Wednesday. Overnight, this jumped up and the same property would come with a bill of £19,723 today. The additional £5,000 cost is large, but more concerning is the timeframe for introduction. Unless missives were already concluded by 4th December, this additional fee is now due. This will likely cause some buyers to withdraw from transactions due to the financial strain. Within hours of this announcement, we are receiving multiple notifications from ESPC solicitor estate agent member firms of concerned purchasers considering withdrawing from their transactions, causing havoc for multiple buyers and sellers.

Paul Hilton, ESPC CEO, said: “Paul McLennan, Minister for Housing for Scotland, recently said that Scotland’s landlords have the right to make a “return” on their investment. Things have just got harder in that respect.

“In the face of a Housing Emergency and with a desperate need for more landlords to enter the market, the Scottish Government has put more barriers in place. In my opinion, this will only continue the cycle of lack of supply within the private rented sector, continuing the shortage of property overall which is a primary cause of the national housing emergency.

“I have said for some time that landlords should be exempt from ADS. We need more, not less, buy-to-let landlords to help provide much needed rental properties. Not to mention reluctant or accidental landlords, who for a number of reasons may technically ‘own' two properties.”