Scottish Government's second home ‘tax’ impacting on Fife property market – call to scrap it

The Additional Dwelling Supplement (ADS) was introduced to try to address the impact of second home buyers on the availability and affordability of local housing in areas like the East Neuk. In November, Ministers raised it from 6% to 8% as part of the Scottish budget process.

Now leading property consultants, Galbraith, has called for a re-think.

It comes as the company’s Cupar office reported a positive first quarter of 2025, handling the sale of 20 percent more properties compared to the previous quarter, and conducting 79 property viewings with prospective purchasers.

Dominic Wedderburn, head of residential sales, “Our latest figures are encouraging, and we have a strong pipeline of properties being prepared for market ahead of the summer selling period. However, the Additional Dwelling Supplement has impacted the entire residential market across Fife. It has had a huge impact on sales in general across the whole of the Fife market.” He said it was a “punitive financial burden for those taking out bridging loans or buying with cash to finance their next home purchase instead of selling.”

Mr Wedderburn added: “Based on a purchase price of £700,000 a buyer purchasing without selling their principal residence would have to pay £56,000 in addition to the required Land and Buildings Transaction Tax (LBTT) of £43,350. Whilst the purchaser would be able to claim back the ADS paid after they have sold their main residence, within a time frame,, it is a significant sum of money for a buyer to produce.”

He said ADS had in effect created a chain process which is common south of the Border.

“Due to the cost of ADS, in addition to the cost of bridging finance, most sales agreed are subject to sale and so we are now operating in a selling chain process, as in England, with properties remaining under offer for longer periods of time with unfortunately some last-minute fall throughs, devastating for all concerned,” he said.

“I would encourage the Scottish Government to review this measure as not only is it a big burden for the property market, but it is also having a knock-on effect on the rest of the local economy. Abolishing ADS on these transactions would help grease the cogs of the Scottish property market resulting in more transactions and higher tax revenue for the Scottish Government through LBTT and allow people to move in a smoother fashion.”

In terms of the bigger property picture, he said a more positive economic outlook and lower interest rates had built confidence in the Fife market.

“When properties are selling, they are selling well under negotiation when accurately priced, and prices achieved this year have been closely aligned to the asking price,” he said.