Additional Dwelling Tax

What is the additional dwelling tax?

It’s a bit of a nasty tax. We probably all feel that all taxes are a bit nasty, but this is one that people do need to be aware of.

The property tax regime is now called Land and Buildings Transaction tax, which replaced stamp duty. Additional dwelling tax or the additional dwelling supplement, as it’s sometimes referred to, is part of that regime.

If you’re buying a property in Scotland, if it’s above a certain threshold, there will be a Land and Buildings Transaction tax to pay. But if you own another property at the point of buying the new one, you will also have this additional dwelling tax supplement to pay.

If you were selling your residential home and immediately buying a new one, you wouldn’t pay tax at that point. But if you’ve got a Buy to Let in the background, it would apply.

When would I have to pay additional dwelling tax?

It’s paid at the point of purchase. Your solicitor will ask you to pay the deposit funds, the Land and Buildings Transaction tax and any additional dwelling supplement that you’re due, plus their fee.

They’ll usually ask for that around four days before the transaction goes through. If you’re selling a property as part of that, they might deduct it from the equity from the sale of that property. But it’s essentially paid on the day of purchase.

How much is the additional dwelling tax in Scotland and how is the additional dwelling tax calculated?

I believe at the moment it’s 8%, but that rate can be reviewed. It’s 8% – or whatever the percentage point is at the time – of the value of the new property [information correct at the time of recording in June 2025].

If I’m buying jointly with someone who already owns a property, do we have to pay additional dwelling tax?

Yes – if anybody on the transaction owns another property there’s really no way to avoid paying it – apart from not owning another property. 

How can I avoid paying additional dwelling tax in Scotland? Are there other options?

There were perhaps some loopholes when it was first introduced, but they’re working hard to close them. Unless you just sell a property, there’s no easy way to avoid it, unfortunately.

Can I get a refund for the additional dwelling tax in Scotland?

If you have a property that you’re selling and the sale hasn’t gone through at the point of buying the other property, you’ll have to pay the additional dwelling tax. Once you’ve sold that second property, you can reclaim the tax if you sell within 18 months. So there’s a window of opportunity, but it’s finite.

How can a mortgage broker help with additional dwelling tax? 

One of the benefits of using an advisor is that they can help you work out your budget, and what you have to pay and when, as well as working out how much mortgage borrowing you need.

Although solicitors administer the additional dwelling tax, a mortgage advisor can be very helpful in the early stages of trying to work out what your budget is and how much of this tax you need to account for.

All taxes are regularly reviewed and the criteria and conditions can change, so it’s helpful to get that up to the minute information.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON  YOUR MORTGAGE.

For specialist tax advice, please refer to an accountant or tax specialist.