ADS Increase – Have The Government Killed the Scottish Property Private Rental Sector?

ADS Increase Have The Government Killed the Scottish Property Private Rental Sector

ADS Increase – Have The Government Killed the Scottish Property Private Rental Sector?


Private landlords have been left reeling after the 2% ADS increase in tax on their properties. Find out more about the impact of ADS Tax Scotland here!


“The ADS is charged at 6%, and is payable on the total purchase price of an additional dwelling if the relevant consideration (usually the purchase price) is £40,000 or more. The 6% rate will apply to transactions entered into on or after 16 December 2022.” – Scottish Government Website.



What is ADS?


Additional Dwelling Supplement (ADS) is a further tax on top of the standard Land and Buildings Transaction Tax (LBTT). This is payable in the majority of circumstances when someone is purchasing a second property such as a buy-to-let or second home. It was only recently introduced in 2016 at 3% and saw an increase to 4% in early 2019.


So, Why is it here? This is the Government’s reasoning for the tax;


“The ADS is an important element of the Scottish Government’s drive to protect opportunities for first-time buyers in Scotland, reinforcing the progressive approach in place for LBTT rates and bands.”


Basically, it’s a tool to deter the purchasing of investment and second home properties. This should free up more stock for first-time buyers to get a foot on the property ladder. All very good in theory and along with first-time buyers’ relief on LBTT, it is a positive implementation.


What Has Changed?


As mentioned, the ADS Tax Scotland was originally set at 3% of the total purchase price. This was increased to 4% in early 2019 and on 15th December 2022, it was announced that it was going up again. This time, the increase is a bigger jump to a whopping 6% and implemented with almost immediate effect.


In addition, there are also the following changes;


  • The threshold at which people start paying the top rate of income tax from its current level of £150,000 to £125,140 from April next year.
  • The higher rate of tax will increase from 41p to 42p in the pound in April.
  • the top rate of tax will increase from 46p to 47p in the pound in April.


You can read an article by the BBC giving an overview of the budget here.


How Will The ADS Increase Impact Purchases?


To put this in perspective, buyers in Scotland will now pay double the rate compared to England and Northern Ireland. This rate is also 2% more than in Wales.


  • A purchase at £100,000 will now pay £6,000 in ADS (£2,000 increase)
  • A purchase at £200,000 will now pay £12,000 in ADS (£4,000 increase)
  • A purchase at £300,000 will now pay £18,000 in ADS (£6,000 increase)
  • A purchase at £500,000 will now pay £30,000 in ADS (£10,000 increase)


With the recent ban on evictions and freeze on rent increases, this action will make investors seriously consider if it’s worth pursuing buy-to-let property. Couple that with the current rise in interest rates for mortgages and it’s hard to see where the profit is.


Why The ADS Tax Scotland Increase Is NOT Beneficial


Based on the previously mentioned reasoning the Government implemented ADS in the first place, you may be inclined to see this as a positive situation. Surely, if landlords are going to be buying less property, this will allow for residential homeowners to purchase and get on the property ladder? – Unfortunately not!


The high-interest rates and soaring cost of living mean that it is still extremely difficult for first-time buyers to save deposits and meet the affordability checks of mortgage lenders. Regardless of the amount of stock available, the ability to purchase remains a problem.


The relatively amateur property owners and accidental landlords will possibly sell. They will still make a profit if they bought sensibly and free up cash to invest elsewhere or keep for a rainy day. Professional landlords will just adapt and keep buying, I’ll go on to discuss their options shortly.


The hardest hit, however, will be tenants who are not in a position to purchase.

If landlords sell up and the number of rental properties available reduce, this will be bad news for tenants. Competition for the property will increase making it harder for tenants to find a home. With all the restrictions, tax increases and barriers in place for landlords, the rent will also increase to act as a buffer. What this means, is that it will be much harder for a tenant to secure a property and much less affordable for them to be able to stay there. 


What Can Investors Do In Reaction To The ADS Tax Scotland Increase


If you are an investor and unsure about what options are available to you, here are 3 things that you can do;


Option 1 – Reconsider Your Expectations


You definitely don’t need to stop buying, you may just need to reconsider what you want to achieve. This could be slightly less profit on flips or a longer period to pull your funds back out if you’re planning on refinancing. 


Sometimes you need to roll with the punches. It won’t last forever!


Option 2 – Buying Below £40,000


ADS is only applicable to property purchases at £40,000 or above. It may be an option for you to look at lower-value properties that avoid the additional tax. Ideally, these have the scope to add significant value and are purchased at a good discount. You can always seek lending on the property at a later date to free up the cash again.

The benefit of these lower-valued properties is that they often come hand and hand with higher yields.


Option 3 – Portfolio Purchasing


I may be slightly biased on this point but both the ADS Relief and also the MDR on LBTT offer a huge saving. These are applicable on portfolio purchases of 6 or more properties!

For example, if you were to purchase a portfolio at £1,000,000 this would now be a huge saving of £60,000 and that is just on the ADS.

For many investors, the funds may not be available to take on larger value purchases. however, you can always consider joint ventures with other Investors or seek private investment finance if the numbers are good. Portfolio purchasing also makes scaling your portfolio much quicker and often comes with better discounts.


Summary About ADS Tax Scotland Increase


So, what have we learned…


  • The ADS Tax Scotland has increased from 4% to 6%.
  • Other Tax increases are aimed at higher-rate taxpayers.
  • Scottish Investors would now pay double the ADS than other parts of the UK.
  • The changes will impact Tenants more than anyone else.
  • There are options available to keep investing.


At the Portfolio Brokers, we specialise in the sales and acquisition of residential property portfolios with a focus on 6+ unit transactions. Now more than ever, larger portfolio purchases are a lucrative option for property investment and we can assist with all aspects of the process.


Is the ADS increase causing you to rethink your strategy? Is portfolio purchasing now on your radar? Please get in touch and book a call. Visit our website at for more information.


Good Luck!


Duncan No Background
Written by:

Duncan Ure

With an extensive experience in Auction Property, Open Market Sales & Lettings, along with his own investment journey, Duncan has a wealth of experience to assist with your investment requirements.

Get Off-Market Insights

Straight to your inbox
* indicates required

You Might Also Like…

As a property investor, expanding your portfolio can be a daunting task. However, working with specialist portfolio estate agents can

Buy-to-let Scotland – If you’re considering investing in a buy-to-let property in Scotland, there are a few things you should

Are you tired of the cutthroat competition in the property market? Seeking an exclusive opportunity that offers privacy, better pricing,


The Portfolio Brokers WhatsApp Chat