Propertymark has expressed disappointment over the Scottish Government’s decision to increase the Additional Dwelling Supplement from 6% to 8%.
It described the decision as “wrong and out of touch” and anticipated that it will result in higher taxes for many buy-to-let investors.
On 4th December 2024, Scotland’s Cabinet Secretary for Finance and Local Government, Shona Robison, announced the 2025-26 Budget to the Scottish Parliament.
The measures proposed included an investment of £768m in affordable homes, with more than 8,000 new properties for social rent, mid-market rent, and low-cost home ownership planned for the coming year.
Robison also pledged £300m for upgrading heat and insulation.
Local authorities will receive a £1bn uplift aimed at preventing significant increases in council tax.
Despite warnings from Propertymark, the Scottish Government opted to increase the Additional Dwelling Supplement.
Buy-to-let investors will face a tax bill of £11,900 due to the Land and Buildings Transaction Tax on an extra property valued at £185,000, which was raised by 6% by the Scottish Government on 16th December 2022.
Propertymark advocated for a reduction of the Additional Dwelling Supplement to encourage investment in the private rental sector, arguing that this would lower the cost of purchasing a second home.
When John Swinney became First Minister of Scotland on 7th May 2024, Propertymark called for the Scottish Government to incentivise investment in the private rental sector by reviewing all costs and taxes that affect private landlords under the Cost of Living (Tenant Protection) (Scotland) Act 2022.
This legislation was initially implemented to address the cost of living crisis but has now laid the groundwork for long-term rent controls in Scotland.
The Scottish Government instituted a higher rental cap of 3% that was set to end in September 2023 but has since been extended until 31st March 2024.
Amid the ongoing cost-of-living crisis, Propertymark said the Scottish Government faced budgetary constraints, prompting it to urge Robison to prioritise investment in the private rental sector.
A report from Propertymark highlighted that 94% of letting agents noted an increase in landlords selling properties when a tenancy concludes, and 93% reported that landlords intended to take properties off the market due to extended cost-of-living measures.
Additionally, 94% of landlords stated they had raised rents because of these policies.
Landlords are also dealing with rising mortgage costs; Propertymark members reported a 270% increase in mortgage costs.
Furthermore, 69% of agents noted a rise in notices to sell in November 2022.
Without rent increases, landlords found it challenging to maintain profitability and property upkeep.
To alleviate pressure on the private rental sector, Propertymark stated that the Scottish Government must enhance the supply of social rented properties.
When the Scottish Government’s Programme for Government was announced on 4th September 2024, Propertymark welcomed measures, including £600m allocated for affordable housing and £40m reserved for policies on reusing empty properties.
However, it warned that any benefits would be undermined by permanent rent controls outlined in the Housing (Scotland) Bill, which passed Stage 1 in the Scottish Parliament on 28th November 2024, allowing local authorities to designate areas for rent control.
Timothy Douglas, head of policy and campaigns at Propertymark, said: “With huge demand for private rented property and long-term rent control measures contained in the Housing Bill, the Scottish Government’s decision to raise Additional Dwelling Supplement under Land and Buildings Transaction Tax from six to eight per cent is quite simply wrong and out of touch with the housing needs of Scotland.
“The decision leaves Scotland as the most expensive place in the UK to rent out a property and will further discourage new landlords to take on much-needed private rented property to let.
Douglas added: “Whilst Propertymark has long called for a review of Land and Buildings Transaction Tax, and the Scottish Government has now committed to do this through the Budget, ultimately with between tenancy rent caps planned and impending minimum energy efficiency rules for private rented property, raising yet more taxes on the private rented sector will do nothing to tackle the housing emergency and only raise rents further and put the burden of these costs on tenants.”
