Hansard

The Land and Buildings Transaction Tax (additional amount: transactions relating to second homes etc) (Scotland) Amendment Order 2024 increases the rate of the additional dwelling supplement from 6 per cent to 8 per cent, with effect from 5 December 2024. The increase is intended to further protect opportunities for first-time buyers and home movers by helping them to compete with buy-to-let investors and second-home owners. For example, someone who is purchasing a £200,000 property as an additional home will have to pay £16,600 more in tax than a first-time buyer would.

The increase is also forecast to raise much-needed revenue at a time when public finances are under significant pressure. The Scottish Fiscal Commission estimates that it will generate an additional £32 million through ADS in the next financial year, thereby contributing to a forecast total for net ADS of £258 million. The forecast incorporates the SFC’s assumptions about the behavioural effects of the change, including the extent to which it will result in more main-market purchases by first-time buyers and home movers than would otherwise have been the case.

Some members have raised concerns about the measure’s potential impact on the provision of housing for private rent. Although the stated policy intent of the increase is to support further opportunities in the main market, in particular for first-time buyers, I recognise the private rented sector’s importance in Scotland’s housing system. I know that not everyone can—or wishes to—buy their own home or easily access affordable housing. We are committed to ensuring that the private rented sector in Scotland is an attractive and affordable option for those who make use of it. We are working to achieve that by ensuring that the sector provides good-quality homes through improved standards and effective regulatory systems. We also want to encourage investment in the sector, so I take those concerns seriously.

Although I appreciate that the circumstances might be different, similar concerns were raised when the ADS was first introduced and again when the rate was increased to 6 per cent in 2022. Although a range of factors, such as interest rates and general housing market performance, must be considered, I note that ADS transactions and revenue in 2023-24 were higher than was initially forecast.

I recognise that the tax is just one factor that will be considered, but I am not aware of any systemic evidence that the ADS has had a significant detrimental impact on the availability of homes for rent in Scotland. The latest available data from the Scottish Landlord Register, for example, indicates that landlord numbers have remained relatively stable since the beginning of 2022, and that the number of properties that are available for rent increased over that period. However, we will continue to monitor the situation and consider all available data concerning the private rented sector.

We are supporting the emergence of a larger-scale PRS by maintaining the relief from ADS when six properties or more are acquired in a single transaction. That has repeatedly been highlighted as a positive differentiator for Scotland in our effort to support the emergence of a larger-scale build-to-rent sector. We recognise build to rent’s role as a mainstream housing delivery model that makes an important contribution to the broader housing market. I look forward to continuing our engagement with the sector on that matter.

Members have also raised concerns about the potential impact of the tax, where difficult or exceptional circumstances might apply—