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The day has come around quickly, but this week (5th December 2024) is the day when ADS increased to 8% when you purchase a residential property within Scotland.
ADS is an additional charge that is added to Land and Buildings Transaction Tax (LBTT) when you buy an additional residential property in Scotland, such as a second home, rental property or even a holiday home.
When you purchase a second residential property (anywhere in the world, it does not have to be in Scotland) and you already own a property in Scotland. It also applies if there are two purchasers (and only one of them already owns a property).
If a Limited company owns one building, and they decide to purchase a second for buy-to-let purposes and the property price is over £40K, this will make the company subject to ADS.
There are some exclusions to the rule, if the property purchased is under £40, ADS will not apply. It does not apply if you have sold your main residence 18 months prior to purchasing your new main residential property.
There is also a limited relief for properties that are inherited. If someone inherits a property after they have entered into a contract to purchase a new main residence (but prior to the completion date) the inherited property will not count towards the number of properties owned in terms of the ADS.
There is also a relief for couples divorcing or separating, that an owner must retain an interest in the main residence that is still the main residence for the former spouse or civil partner.
The new ADS rate as of 5th December 2024 is 8% of the purchase price. This has slowly crept up over the last few years, back at the end of January 2019 it was 4%, demonstrating it has doubled in only 5-6 years.
For any legal missives signed and entered into prior to 5th December, the rate of 6% for ADS will be applied.
The Scottish Government are stating that this increase will create an additional revenue of around £32 million during 2025-2026 which will be used to support public services in Scotland. They are also making plans to protect opportunities for first time buyers in Scotland. A review of LBTT is scheduled to take place in Parliament in Spring 2025.
Use the LBTT calculator online to work out how much tax you will be paying.
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