Land and Buildings Transaction Tax: review

ADS and 6+ Dwellings Exemption

Summary

This is a summary of our analysis of Scotland’s ADS and 6+ dwellings exemption.

Objectives

ADS: To reduce competition for first-time buyers by making second and subsequent home purchases more expensive. (Scottish Parliament, 2016).

ADS: To further raise tax revenues in order to support Scottish public services (Scottish Government, 2021c).

6+ dwellings ADS exemption: To promote large-scale rental housing provision and avoid deterring institutional investment in build-to-rent developments (Scottish Parliament, 2016).

Technical overview

ADS: A supplemental tax charge on purchases of additional residential properties, payable on top of the standard LBTT (Land and Buildings Transaction Tax (Scotland) Act 2013, Sch 2A).

6+ dwellings ADS exemption: A provision that exempts transactions involving six or more residential dwellings from paying the ADS (Land and Buildings Transaction Tax (Scotland) Act 2013, Sch 2A).

Note that in addition to the specific ADS exemption, transactions of six or more dwellings are also subject to non-residential LBTT rates (Land and Buildings Transaction Tax (Scotland) Act 2013, s 59).

Interactions with other reliefs and mechanisms

ADS:

• With non-residential/mixed: For commercial transactions with no dwellings involved, no ADS is applied. For mixed transactions, ADS may be payable if the residential dwelling meets the ADS conditions.
• With MDR: When a buyer purchases multiple residential properties together, both the ADS and the MDR can potentially apply simultaneously (Revenue Scotland, 2024g interpretation).
• With first-time buyer relief: First-time buyer relief is not available whenever the ADS applies (Revenue Scotland, 2024e interpretation).

6+ dwellings ADS exemption:

• With non-residential/mixed: When a buyer purchases six or more separate dwellings in a single transaction, LBTT is calculated using the non-residential tax bands, and no ADS is payable. The 6+ dwellings ADS exemption still applies if the transaction includes a non-residential element (Revenue Scotland, 2024d interpretation).
• With MDR: When a buyer purchases multiple residential properties together, both the 6+ dwellings ADS exemption and the MDR can potentially apply simultaneously (Revenue Scotland, 2024g interpretation).
• With first-time buyer relief: First-time buyer relief is not available whenever the 6+ dwellings ADS exemption applies (Revenue Scotland, 2024e interpretation).

Comparative analysis

• The 8% ADS makes Scotland’s supplemental charge the highest in the UK as of 2025. The equivalent SDLT higher rates for additional dwellings in England and Northern Ireland is currently five percentage points above standard residential rates, as are Wales’s higher LTT rates for purchases of additional property (HM Revenue & Customs, 2024; Welsh Government, 2024a).

6+ dwellings ADS exemption:

• Like LBTT, SDLT treats acquisitions of six or more dwellings as non-residential transactions, thereby granting relief from the additional homes SDLT and LTT higher rates (HM Revenue & Customs, 2025a).
• Under LTT, taxpayers may classify transactions involving six or more dwellings as either residential, potentially qualifying for MDR, or non-residential, whereby lower rates would apply. When non-residential treatment is chosen, the result is the same as under LBTT (Welsh Government, 2024b).

Materiality analysis

ADS (Revenue Scotland, 2025c):

• Net ADS revenue has increased over time, rising from 17% to 22% of total LBTT receipts over the period between 2016/17 and 2024/25. This is mainly due to the rise in the ADS rate.
• Between 17% and 20% of residential submissions included an ADS charge.
• Both the number of returns claiming ADS-linked reliefs and the value of revenue forgone have steadily increased over the period. The share of overall forgone revenue reached 23% of the total in 2024/25.

6+ dwellings ADS exemption:

• 6+ dwellings ADS exemption accounted for 3-7% of total foregone revenue since 2018/19. It was similar to that of first-time buyer relief, at around half the value of MDR (Revenue Scotland, 2025c).

Findings from stakeholder engagement

Stakeholder engagement found the ADS is unpopular, especially among landlords and small investors, who see it as a major barrier to market entry and investment, contributing to reduced housing supply and higher rents. The 6+ dwellings ADS exemption was viewed as effective in enabling large-scale investment but criticised for disproportionately benefitting institutional investors over smaller landlords, with concerns about market concentration and inequality.

Large investors considered the 6+ dwellings ADS exemption essential for the viability of portfolio purchases, while smaller landlords viewed it as irrelevant and unfair, excluding most landlords from relief and limiting small-scale investment opportunities. Some highlighted that this could slow small development activity and create threshold effects, with landlords seeking to meet exemptions by altering purchase behaviour.

Views on reform were mixed. Some supported lowering the exemption threshold to broaden access for smaller landlords, while large investors suggested raising it to better target institutional-scale development. Others proposed exempting long-term rental properties or introducing time-limited ADS holidays to stimulate activity, but cautioned that complementary support for first-time buyers would be needed.

Objectives

ADS: Introduced in April 2016, the ADS is an extra charge on purchases of additional residential properties (such as second homes or buy-to-let rentals) aimed at reducing competition for first-time buyers by making second and subsequent home purchases more expensive. It was partly motivated by the UK Government’s announcement that it would introduce a higher rate of SDLT on the purchase of additional residential properties. It was recognised that this could make Scotland a more attractive investment destination for additional residential properties relative to the rest of the UK, which, in turn, might make it more difficult for first-time buyers in Scotland to buy a property (Scottish Parliament, 2016). The Scottish Government also makes explicit the ADS’s role in raising revenue for public services in Scotland (Scottish Government, 2021chttps://revenue.scot/taxes/land-buildings-transaction-tax/lbtt-legislation-guidance/additional-dwelling-supplement-ads-technical/ads-overview-aims). This rationale is especially relevant given the Block Grant Adjustment, as overall Scottish Government tax revenues will decrease if LBTT revenues do not keep pace with SDLT revenues (Scottish Fiscal Commission, 2020).

6+ dwellings ADS exemption: This refers to a full relief from the ADS that applies where six or more dwellings are purchased in a single transaction, introduced in the 2016 LBTT amendment, which established the ADS. The impetus for this relief was to ensure that the ADS was able to “support home ownership and first-time buyers without discouraging significant and beneficial investment in residential property for rent” (Scottish Parliament, 2016).

Technical overview^[11]

Description and administration

ADS:

• A supplemental tax charge on purchases of additional residential properties (e.g., second homes or buy-to-let houses), payable on top of the standard LBTT.
• The ADS is applied via LBTT return – buyers declare the purchase of an additional dwelling and calculate the ADS accordingly, with payment due at the same time as LBTT.

6+ dwellings ADS exemption:

• A provision that exempts transactions involving six or more residential dwellings from paying the ADS.
• Note that in addition to the specific ADS exemption, transactions of six or more dwellings are also subject to non-residential LBTT rates.
• This is automatic – no special claim is needed beyond correctly categorising the transaction on the LBTT return.

Timeframe and value

ADS:

• In effect since 1st April 2016 (for transactions on or after that date).
• The initial ADS rate was 3% of the purchase price; this was raised to 4% on 25th January 2019, then to 6% from 16th December 2022, and most recently to 8% effective from 5th December 2024.
• £257.8 million in gross ADS was declared due in 2024-2025, up from £237.9 million in 2023-2024, reflecting the increase in the ADS rate from 6% to 8% (Revenue Scotland, 2025h).

6+ dwellings ADS exemption:

• The non-residential treatment of transactions involving six or more dwellings has been in force since LBTT’s introduction on 1st April 2015. The specific exemption for ADS payments then came into effect with the ADS’s introduction on 1st April 2016.
• The value of this exemption from the perspective of buyers lies in its potential for large tax savings on bulk residential acquisitions. First, the ADS (8%) is fully avoided. Second, LBTT is capped at 5% due to lower non-residential rates.

Eligibility criteria and limitations

ADS:

• The ADS is payable when: (i) the buyer purchases a residential property in Scotland and they already own one or more residential properties anywhere in the world; (ii) where there are two or more buyers, if any of the buyers already owns one or more residential properties anywhere in the world; and (iii) the buyer is not replacing or selling their only or main residence. Note that the ADS does not apply to non-residential transactions.
• The ADS will not apply if: (i) the buyer only owns one dwelling at the end of the effective date of the transaction, (ii) the purchase price of the property is less than £40,000, (iii) the buyer’s additional property has a value less than £40,000, (iv) the buyer’s other property is a share in a jointly owned property and the value of that share is less than £40,000, or (v) the buyer disposes of their previous only or main residence in the 36 months before purchasing their new main residence.
• From 1st April 2024, the ADS can be reclaimed if: (i) the previous main residence is sold within 36 months of the new property purchase; (ii) the property sold was the buyer’s only or main residence in the 36 months before purchasing their new main residence; and (iii) the buyer has lived in their new main residence, on which they paid the ADS. The 36-month grace period was previously 18 months.

6+ dwellings ADS exemption:

• The purchase must involve six or more residential dwellings in a single transaction.
• Although such transactions are classified as non-residential for LBTT purposes, this does not prevent the buyer from claiming the MDR. Where both the 6+ dwellings ADS exemption and the MDR are claimed, the ADS is not included in the MDR calculation.

Interactions with other reliefs and mechanisms

Between non-residential/mixed-use properties and ADS

A transaction deemed fully “non-residential” under LBTT is outside the scope of the ADS. For purely commercial transactions with no dwellings involved, this means that no ADS is applied. A notable case is mixed-use transactions, e.g., buying a building that has both a shop and a flat, or a house with substantial land or a commercial element. By statute, a mixed transaction is taxed as non-residential, so the base LBTT is at the lower non-residential rates. However, the ADS may still be payable in a mixed transaction: if the transaction includes a residential dwelling that meets the conditions for ADS to be payable (e.g., the buyer is not replacing their main residence, its value is £40,000 or higher), the 8% ADS is charged on the portion of the consideration attributable to that dwelling. For example, if someone buys a £1 million property that is half commercial, half dwelling, which meets the conditions for ADS to be payable, LBTT is computed under non-residential bands on the £1 million, but the 8% ADS still applies to the £500,000 dwelling portion (Revenue Scotland, 2024c interpretation).

Between non-residential/mixed-use properties and 6+ dwellings ADS exemption

When a buyer purchases six or more separate dwellings in a single transaction, Scottish law treats the transaction as non-residential for LBTT purposes. The immediate consequences are twofold: (1) LBTT is calculated using the non-residential tax bands, and (2) full relief from the ADS is granted, meaning no ADS is payable. This mechanism is effectively a special relief or status that large residential portfolio transactions enjoy. However, the 6+ dwellings ADS exemption still applies if the transaction includes a non-residential element, provided that it also involves six or more residential dwellings (as per the conditions of the relief). In such cases, no ADS is paid on either the residential portion or the non-residential portion – the former due to the 6+ dwellings ADS exemption and the latter due to the ADS not being payable on the non-residential portions of mixed transactions (see above) (Revenue Scotland, 2024d interpretation).

Between MDR and ADS

When a buyer purchases multiple residential properties together, both the ADS and the MDR can potentially apply simultaneously. The law provides a formula to integrate them, with the MDR normally computed on the average consideration per dwelling and added up for each average consideration, and then the ADS is added to each average consideration per dwelling for only those dwellings on which the ADS is applicable. If all dwellings in the transaction are subject to ADS (none qualify as replacement of a main home) and the MDR is being claimed, then the ADS payable is effectively a flat surcharge on top of a base LBTT, which has been lowered by the MDR. However, when one or more dwellings are exempt from the ADS (e.g., one of the purchased units is intended as the buyer’s new main residence, replacing an old one), the calculation must separate those out. In such cases, Revenue Scotland advises that the tax be computed for each dwelling individually: the ADS is added only to those dwellings that trigger it, and not to the one replacing a main residence (Revenue Scotland, 2024g interpretation).

Between MDR and 6+ dwellings ADS exemption

The 6+ dwellings ADS exemption adds an additional layer to the interaction described above between the MDR and the ADS. Crucially, even though a transaction eligible for the 6+ dwellings ADS exemption is considered “non-residential” for LBTT purposes, the MDR can still be claimed in this scenario while retaining the benefit of the non-residential rates. More precisely, even though a 6+ dwelling purchase is assessed at non-residential LBTT rates, the buyer is allowed to use the MDR mechanism to compute tax on an average unit price (subject to the 25% minimum) and then pay LBTT accordingly, all at non-residential rates. This presents a highly favourable scenario for the taxpayer, allowing them to benefit from non-residential rates (lower than residential rates), the MDR (enabling them to calculate LBTT using the average consideration per unit) and full relief from the ADS (due to the 6+ dwellings exemption) (Brodies, 2021).

Between ADS and 6+ dwellings exemption

Where six or more separate dwellings are acquired in a single transaction, Scottish law provides that the purchase is treated as non-residential for LBTT purposes. As a result, no ADS is payable when the 6+ dwellings condition is met (Revenue Scotland, 2025b interpretation).

Between ADS and first-time buyer relief

As noted above, first-time buyer relief is not available whenever the ADS applies (Revenue Scotland, 2024e interpretation).

Between 6+ dwellings ADS exemption and first-time buyer relief

No interaction is possible between the first-time buyer relief and the 6+ dwellings ADS exemption, as the first-time buyer relief is only available for purchases consisting entirely of residential property. The 6+ dwellings ADS exemption would result in the transaction being classified as non-residential, thereby disqualifying the buyer from first-time buyer relief (Revenue Scotland, 2024e; Revenue Scotland, 2025b interpretations).

Comparative analysis

This section presents a comparative analysis of the LBTT ADS and 6+ dwellings exemption applicable to transactions in Scotland, vis-à-vis SDLT in England and Northern Ireland, and LTT in Wales.

Key differences between LBTT and SDLT

Both Scotland and England levy an extra tax on purchases of additional residential properties (which may take the form of second homes or buy-to-let investments), but the rates and some rules differ substantially. Scotland’s ADS was introduced in 2016 and is added on top of LBTT at a percentage of the full price for any purchase of a residential property where the buyer already owns one or more dwellings (and is not replacing their main residence). Initially set at 3%, the ADS was later raised to 4% in 2019 and then 6% in December 2022 (Revenue Scotland, 2025g). Most recently, in December 2024, the ADS in Scotland increased further to 8% of the purchase price. This means purchasing an additional property in Scotland now incurs a substantial levy, with a £300,000 second home attracting £24,000 of ADS alone (on top of the underlying LBTT). The Scottish Government has justified this as a measure to protect the market for first-time buyers and raise revenue (Adam and Phillips, 2025).

The 8% ADS makes Scotland’s supplemental charge the highest in the UK as of 2025. In England and Northern Ireland, the equivalent SDLT higher rates for additional dwellings began at three percentage points above standard residential rates in April 2016, mirroring Scotland’s initial ADS rate (HM Revenue & Customs, 2022). The higher rates remained at this level until late 2024, when the UK Government increased them by two percentage points. As of October 2024, England and Northern Ireland’s SDLT higher rates on additional dwellings is five percentage points above standard residential rates. So, for example, an English buy-to-let purchase of £300,000 now incurs a £15,000 higher rate charge (5%) versus £24,000 (8%) on the same in Scotland. The policy rationale in England and Northern Ireland is similar to that in Scotland: to curb demand in second homes and buy-to-let properties and raise revenue (HM Treasury, 2016; HM Revenue & Customs, 2024).

Despite the rate gap, many operational rules of the ADS and equivalent SDLT higher rates are alike. In both regimes, if the buyer sells their previous main home within a fixed period, they can claim a refund of the additional tax. A previous difference, which has now been eliminated, was the refund window: SDLT allows 36 months to dispose of the old home, whereas LBTT originally allowed only 18 months. However, Scotland extended its refund period to 36 months for transactions with effective dates on or after 1st April 2024. Another commonality is the £40,000 value threshold: both taxes exempt additional purchases under £40,000 (and leases under certain terms) from the supplemental charge. Additionally, both treat married couples (and certain trusts) as a single unit – if either spouse would own two properties as a result of the transaction, the supplement applies. A key distinction between the two regimes is that under SDLT, only spouses and civil partners are treated as a single unit. Cohabiting partners are assessed individually, meaning the supplement applies only if the buyer personally acquires an additional property. Under LBTT, by contrast, cohabitees (defined as those living together “as though married”) are treated as one economic unit alongside spouses and civil partners, so the supplement is triggered if either partner would own multiple dwellings after the transaction (Revenue Scotland, 2024c interpretation; HM Revenue & Customs, 2025a).

It is worth noting that SDLT imposes an extra 2% on non-UK residents buying residential property (even if it is their sole UK property) ( HM Revenue & Customs, 2025a). Scotland has thus far not implemented a non-resident LBTT surcharge (Masala, 2025). This means a non-UK resident who buys a second home in Scotland pays 8% ADS – the same as a local investor. In England or Northern Ireland, the same buyer would effectively pay an additional 7% (5% because it is an additional dwelling and 2% because they are a non-resident) on top of normal SDLT rates. The SDLT surcharge also applies when a major interest in a freehold residential property valued at £40,000 or more is purchased, and one or more of the buyers is a non-UK resident. This means the 2% surcharge can still be triggered even if some buyers are UK residents while others are not (HM Revenue & Customs, 2025c).

Both tax systems provide that buying a large number of dwellings in one transaction can be exempted from paying the supplemental ADS charge and are treated as non-residential. In Scotland, if six or more dwellings are acquired in a single transaction, the law deems the entire transaction non-residential for LBTT purposes, such that non-residential LBTT rates apply (which are lower than residential rates at those prices) and no ADS is charged since. SDLT had a similar rule: a purchase of six or more dwellings may be taxed at non-residential SDLT rates, thereby avoiding the higher rates on additional dwellings entirely. Until mid-2024, English and Northern Irish buyers actually had a choice: they could either claim MDR on a bulk purchase or elect to have it treated as non-residential (in practice, choosing whichever yielded less tax). As part of the 2024 reforms that abolished MDR, this choice was removed – now, SDLT mandates non-residential rates for 6+ dwellings (HM Revenue & Customs, 2025a). The previous ineligibility for MDR if English or Northern Irish buyers were treating their purchase as non-residential differed from Scotland’s system, which allows for MDR to be claimed while also benefiting from non-residential rates in a 6+ dwellings transaction.

Key differences between LBTT and LTT

When it comes to taxing second homes and buy-to-let purchases, Scotland and Wales have taken similar approaches, with differences mainly in the rate level and timing of changes. Scotland’s ADS and Wales’s higher LTT rates for purchases of additional property both launched with a 3% rate (three percentage points above main rates in the case of Wales), aligning with the SDLT supplemental charge, which was in force in Wales since it was introduced in 2016, when the Scottish ADS was also introduced, until LTT came into effect in 2018. Over time, each government increased their separate rates. Scotland was the first to raise the rate to 4% from January 2019 onwards. Wales followed by raising the rate to 4% (effective 22nd December 2020), mirroring Scotland’s rate. Scotland again raised its rate in December 2022, to 6%, and in December 2024, to 8%. Wales raised its rate to 5% in December 2024, achieving parity with SDLT higher rates at the time (Welsh Government, 2024a; Revenue Scotland, 2025g). As such, there currently exists a difference of three percentage points between LBTT’s ADS and LTT’s higher rates.

Both regimes share the same basic framework for when the additional charge applies: generally, if at the end of the day of purchase the buyer owns two or more residential properties, the additional dwelling supplement is due. There are mirror provisions on refunds if the former main residence is sold within a window of 36 months, on a £40,000 minimum property value to trigger the charge, and on treating married couples as one unit. However, unlike Scotland's LBTT, which also deems cohabitees as one economic unit and applies the supplement accordingly, LTT excludes them from joint treatment (Revenue Scotland, 2024c interpretation; Welsh Government, 2025b). One noteworthy Wales-specific element is the SDE: if a buyer purchases a main home that includes a small second dwelling (e.g., a self-contained annex or a second house on the grounds) below a certain value relative to the main home, that subsidiary dwelling can be disregarded for the higher rates – meaning the transaction is charged at main rates, not higher rates (Welsh Government, 2024b). Scotland has a similar concept, although, as discussed above, the mechanism differs.

Unlike LBTT, LTT does not automatically treat acquisitions of six or more dwellings as non-residential transactions. Taxpayers may choose how a transaction is classified for tax purposes. If it is treated as residential, higher rates apply, although MDR may be available. Alternatively, the transaction can be classified as non-residential, which removes the additional dwellings supplement and typically results in a lower base tax rate. For example, a portfolio of six houses in Wales for £1.2 million would be charged LTT at commercial rates (0% up to £225,000, 1% on £225,001 to £250,000, 5% on £250,001 to £1,000,000, and 6% on the remaining value) with no additional property supplement – a significant tax reduction relative to treating them individually. Thus, investors in both countries have a clear tax incentive to structure deals such that they cross the six-dwelling threshold where feasible. One nuance, however, is that Scotland allows for combining the 6+ dwellings ADS exemption with MDR. Wales’s guidance instead presents buyers with a choice: where six or more dwellings are acquired, the taxpayer can either claim MDR such that the transaction is treated as residential and therefore subject to higher residential rates, or MDR is not claimed, and the total consideration is subject to non-residential property rates (Welsh Government, 2025c).

Materiality analysis

ADS

The data indicates that ADS accounts for a substantial share of overall LBTT revenue. Net ADS revenue, calculated as gross ADS revenue minus reclaimed amounts, has increased over time, rising from 17% to 22% of total LBTT receipts over the period between 2016/17 and 2024/25 (see Table 26 and Figure 30). This is likely due in part to the rise in the ADS rate over the period, which has increased from 3% at its introduction to the current 8%. In terms of returns, the absolute number remained relatively stable before rising sharply in 2021/22. Since then, the total number of returns has declined consistently each year. However, when viewed relative to the total number of residential claims, the proportion of LBTT returns including an ADS charge has remained broadly stable throughout the period, with between 17% and 20% of residential submissions subject to ADS.

Reliefs linked to ADS represent a substantial component of total forgone revenue. Both the number of returns claiming ADS exemption and the value of revenue forgone have steadily increased over the period. Notably, forgone revenue from ADS has increased not only in absolute terms but also as a proportion of total forgone revenue, rising from just 3% in 2015/16 to 23% in 2024/25 (see Table 27 and Figure 31). Again, this increase in forgone revenue is likely driven by the higher ADS rates on second homes introduced over the period, which have meant that exemptions to paying ADS have a more significant impact on forgone revenues.

Comparing 6+ dwellings ADS exemption with MDR and first-time buyer reliefs

The data indicates that, relative to other reliefs considered in this review, the 6+ dwellings ADS exemption accounts for a substantial proportion of total LBTT revenues forgone. Table 24 and Figure 29 present the revenue forgone through each of these reliefs, both in monetary terms and as a share of total LBTT revenues forgone. Among the three, MDR consistently represents the largest share, accounting for between 7% and 15% of total revenues forgone. The 6+ dwellings ADS exemption has a more modest impact, generally around 3-4%. First‑time buyer relief typically results in forgone revenues of a similar scale to 6+ dwellings ADS exemption, though with greater year‑to‑year variation. As illustrated in Figure 29, forgone revenue from both the 6+ dwellings ADS exemption and first‑time buyer relief usually amounts to around half the value of MDR. However, in 2024/25, the difference between the three narrowed noticeably. Table 25 further highlights the significance of these reliefs when expressed as a proportion of overall LBTT revenues.

Findings from stakeholder engagement

Summary of findings

The ADS was unpopular among many stakeholders and was viewed by some as a major barrier to entry for landlords and small investors partaking in the property market. Many argued it deters investment, reduces housing supply and raises rents. The 6+ dwellings ADS exemption was seen as successful in encouraging large-scale investment but criticised for favouring institutional investors over smaller landlords, potentially concentrating ownership and worsening inequality. Views on reform varied, with some calling for lowering or abolishing the threshold to support smaller investors, while others suggested raising it to better target large developments.

Stakeholder views on ADS

Among interview participants, the ADS was widely regarded as the most unpopular aspect of LBTT, especially among landlords. Many landlords described the ADS as the primary factor influencing property purchase decisions, with the standard LBTT rate having comparatively little impact. The ADS was seen as a significant barrier to entry for those seeking to enter the buy-to-let market, with stakeholders suggesting that its high rate discourages smaller investors and landlords. One stakeholder highlighted that the ADS also applies to purchases of empty properties intended for renovation and re-entry into the market, acting as a deterrent to increasing housing supply. Stakeholders also pointed out that the ADS disproportionately affects low-value properties relative to the rental income they can generate, leading investors to avoid these properties.

While some stakeholders acknowledged the ADS’s role in discouraging second-home purchases and supporting first-time buyers, there was also recognition that it impacts properties intended for rental. Landlords noted that if rental income cannot cover the costs of purchasing and maintaining a property, landlords have little incentive to buy or retain properties. This consequent reduction in landlords and investment was said to have wider consequences, including reduced worker mobility, increased tenant evictions, and rising rents. One respondent observed that the additional costs associated with ADS are ultimately passed on to tenants through higher rents. As a result, some described the ADS as effectively a “tenant tax” rather than a landlord tax.

Effectiveness of 6+ dwellings ADS exemption in meeting objectives

Stakeholders generally agreed that the relief achieved its intended objective of supporting larger-scale investment in the residential and private rented sectors. One larger landlord reported that the relief had a significant practical impact on investment decisions in Scotland, highlighting that saving 8% on each property when purchasing six or more homes translates into a substantial overall saving. They confirmed that this exemption directly affected their organisation, explaining that they had purchased two portfolios of more than six properties and that neither purchase would have been viable without the ADS exemption. They believed the measure encourages transactions that might not otherwise take place. Similarly, a solicitor observed that many projects would not proceed without the six-or-more exemption.

Another investor described the exemption as a “significant factor” in their investment decisions and a positive incentive that makes Scotland more attractive compared to England, primarily because of differences in tax rates. Other large investors said the exemption was “taken as given” and argued that applying the ADS charge to bulk transactions would undermine viability and penalise developers who contribute to housing supply. They considered it appropriate that such investors do not pay ADS, as they are adding to, rather than withdrawing from, the available stock. Several stakeholders noted that the relief also has indirect benefits for tenants, as it enables investors to acquire properties under the ADS exemption, helping to maintain or increase housing supply in the rental sector.

However, some stakeholders pointed out that the overall impact of the relief may be limited by other policy measures, particularly rent controls, which they view as discouraging investment. One landlord also suggested that the relief is often used by landlords transferring personal portfolios into limited companies to avoid ADS, meaning it may influence restructuring decisions more than new investment. One stakeholder noted that whilst there was the potential for compliance risks, they considered the likelihood of issues to be lower than for the MDR due to the higher investment threshold.

Stakeholder criticism of 6+ dwellings ADS exemption

Despite stakeholders acknowledging that the relief achieved its intended aim of supporting large-scale investment, it attracted significant criticism, particularly from smaller landlords and estate agents. Many viewed the relief as unfairly benefiting large landlords and institutional investors at the expense of smaller ones. Several noted that this approach seemed designed to squeeze smaller landlords out of the market. Multiple stakeholders highlighted that the vast majority of Scottish landlords own only one or two additional properties, making the 6+ exemption largely irrelevant to them. For most landlords, opportunities to invest at the required scale are rare, as few purchase properties in bulk. Some argued that this effectively meant only smaller landlords were liable for ADS, while large commercial investors, who they felt should pay more, were exempt. Stakeholders observed that the current policy excluded many potential investors who could afford only a few properties at a time. This, they warned, limited investment opportunities and created problems for smaller landlords wishing to sell their portfolios. For instance, a landlord with five rented properties might struggle to find a buyer because the transaction would not qualify for the tax exemption.

Several participants raised further concerns that heavily taxing these smaller investors could slow the progress of small developments, where pre‑sales are essential for financial viability. Others worried about a potential concentration of property ownership, with the relief strengthening the position of large investors and exacerbating wealth inequality in the property market, contrary to Scotland’s wider social and economic objectives.

A number of stakeholders also believed the Scottish Government was deliberately discouraging small or part‑time landlords. One estate agent suggested that professional landlords are more compliant with tax and housing legislation and more likely to seek professional advice, which may explain the government’s preference for larger, institutional landlords. However, they noted a growing trend of smaller landlords aspiring to operate professionally. Other stakeholders expressed concern that this shift could lead to a rental market dominated by corporate, profit‑driven ownership models, reducing the quality of landlord-tenant relationships. They argued that corporate landlords tend to prioritise profit, often resulting in higher rents and weaker tenant protections.

Stakeholders in rural areas also questioned the relevance of the 6+ rule, given that transactions of such scale are exceedingly rare outside urban markets. Several noted that small‑scale buy‑to‑let investors have already been leaving the market due to other policy changes, such as restrictions on mortgage interest deductions and additional council tax charges on second homes. Lawyers raised further criticisms, describing the 6+ exemption as somewhat arbitrary. They questioned why the number of dwellings or buildings on a property should determine tax treatment, noting that definitions of what constitutes a “dwelling” can vary and produce inconsistent outcomes.

Some interviewees also reported that the exemption may be distorting the market around the threshold, which is based on the number of dwellings acquired in a single transaction rather than their value. A few provided anecdotal evidence of “bunching,” with landlords attempting to reach six properties to qualify for the exemption. One estate agent described advising a landlord planning to buy five properties to instead purchase a sixth to save £50,000 in ADS. Some stakeholders also reported evidence of landlords waiting until they could complete a six-property transaction before proceeding with a purchase. However, legal professionals did not report consistent evidence of such threshold effects in practice.

Appropriateness and potential changes to 6+ dwellings ADS exemption

Views on the appropriateness of the 6+ dwellings ADS exemption threshold varied considerably across stakeholder groups. Several estate agents and landlords suggested that lowering the threshold to around two, three, or four properties could help make the housing market more fluid, encourage smaller-scale transactions, and make it easier for tenants to remain in their homes when ownership changes. However, most landlords felt that even a reduction to two or three properties would have little effect, as they typically do not purchase more than one property at a time. Many believed the threshold should instead be reduced to one or zero – effectively abolishing the ADS. Others proposed exempting all properties intended for long-term rental rather than use as second or holiday homes, arguing that landlords purchasing homes to provide accommodation for tenants should be supported.

Conversely, one large-scale investor considered a six-property threshold to be very low, noting that their typical projects involve 100 apartments or more, while even smaller institutional investors often manage portfolios of 35-100 homes. They suggested that a higher threshold and more tailored relief for institutional investors could attract greater investment in Scotland, making tax treatment more proportionate to the scale of investment. Some respondents also indicated that the current threshold may be slightly low and not particularly effective in encouraging large transactions, while a higher threshold could simplify compliance.

An interviewee cautioned, however, that increasing the threshold could have unintended consequences, potentially excluding smaller portfolios more common in rural areas. They also observed that while consultations elsewhere in the UK have explored higher thresholds, such as 15 properties, portfolios in Scotland tend to be smaller on average.

Some stakeholders proposed alternative measures to stimulate the housing market, including a temporary ADS holiday, which they believed would boost market activity, increase supply and help reduce rents. Another stakeholder noted that while removing ADS could benefit landlords, complementary measures would be needed to support first-time buyers to avoid increasing competition between the two groups.