More buy to let purchases fall apart over the Additional Dwelling Supplement than over the mortgage. It is a large, unavoidable, cash cost that cannot be added to the borrowing, and it is calculated in a way that surprises people who are used to how stamp duty works elsewhere. This is the short, clear version.
What ADS is and what it costs
The Additional Dwelling Supplement is a surcharge on top of Land and Buildings Transaction Tax when you buy an additional residential property in Scotland — a buy to let, a second home, a holiday let. For transactions on or after 5 December 2024 the rate is 8%, up from 6% previously.
It applies where the consideration is £40,000 or more. Crucially, it is charged on the whole purchase price rather than on the portion above a threshold. There is no nil rate band for ADS. Buy at £120,000 and you owe £9,600 in ADS, even though standard LBTT on that purchase would be nil.
| Purchase price | ADS at 8% | Standard LBTT | Total to Revenue Scotland |
|---|---|---|---|
| £80,000 | £6,400 | £0 | £6,400 |
| £120,000 | £9,600 | £0 | £9,600 |
| £150,000 | £12,000 | £100 | £12,100 |
| £200,000 | £16,000 | £1,100 | £17,100 |
| £300,000 | £24,000 | £4,600 | £28,600 |
Who has to pay it
- Anyone buying a buy to let property while already owning a residential property.
- Anyone buying a second home or holiday home.
- Couples where either party already owns residential property — ADS is assessed across the economic unit, not per person.
- Companies buying residential property, in almost all cases regardless of what else is owned.
- Parents buying jointly with a child where the parent already owns a home — a very common and expensive surprise.
When you can reclaim it
If you paid ADS because you bought your new main residence before selling the old one, you can reclaim it once the previous main residence is sold. For transactions with an effective date on or after 1 April 2024 the relevant window is 36 months, extended from the 18 months that applied previously.
The reclaim is made to Revenue Scotland, normally through your solicitor. It only applies to replacing a main residence — there is no reclaim available on a property genuinely bought as a rental investment.
Exemptions and edge cases
- Under £40,000 — no ADS is due.
- Properties that are not dwellings — commercial premises, and certain mixed-use purchases, fall outside ADS.
- Six or more dwellings in one transaction — may be treated as non-residential, which can change the position substantially for portfolio purchases.
- Inherited property — an inheritance is not itself an ADS transaction, but it may make a later purchase liable.
- Divorce and separation — the rules on jointly owned former matrimonial homes are involved and worth taking specific advice on.
Budgeting for it properly
The mistake we see repeatedly is a buyer who has saved a 25% deposit and assumes they are ready. On a £180,000 purchase the deposit is £45,000 — but ADS adds £14,400 and LBTT another £800, so the real requirement is around £61,400 before legal fees.
ADS cannot be added to your mortgage. It is payable to Revenue Scotland at settlement. Work out your total cash requirement before you start viewing, not after your offer is accepted.
Common questions
This guide is general information, not regulated financial advice, and reflects our understanding of the rules at the date shown. Tax treatment depends on individual circumstances and may change. Your home may be repossessed if you do not keep up repayments on your mortgage. Not all buy to let mortgages are regulated by the Financial Conduct Authority.