Paul McLennan, minister for housing for Scotland, recently said that landlords north of the border have the right to make a “return” on their investment. But “things have just got harder in that respect”, said Paul Hilton, CEO of Scottish property portal ESPC.

ESPC has responded with disappointment to the Scottish government’s announcement in the 2025-26 Budget that the Additional Dwelling Supplement (ADS) will increase from 6% to 8%.

Shona Robison, Scotland’s cabinet secretary for finance and local government, outlined the budget plans for the year ahead, which included a number of measures aimed at investing in more affordable homes with a target of 8,000 new properties for social rent, mid-market rent and low-cost home ownership.

However, details also emerged to increase the tax supplement on purchases of second homes from six percent to eight percent. This substantial rise has been brought in with no notice, impacting many property transactions as purchasers now have to find an additional two percent of the property transaction cost overnight.

A typical two-bedroom flat in Leith, an area popular with buy-to-let investors, commanded an ADS bill of approximately £14,792 yesterday, but the same property would come with a bill of £19,723 today. The additional £5,000 cost is large, but more concerning is the timeframe for introduction, according to Hilton.

Unless missives were already concluded by 4 December, this additional fee is now due. This will likely cause some buyers to withdraw from transactions due to the financial strain. Within 24 hours of this announcement, we are receiving multiple notifications from ESPC solicitor estate agent member firms of concerned purchasers regarding withdrawing from their transactions causing havoc for multiple buyers and sellers.

Hilton commented: “In the face of a housing emergency and with a desperate need for more landlords to enter the market, the Scottish Government has put more barriers in place. In my opinion, this will only continue the cycle of lack of supply within the private rented sector, continuing the shortage of property overall which is a primary cause of the national housing emergency.

“I have said for some time that landlords should be exempt from ADS. We need more, not less, buy-to-let landlords to help provide much needed rental properties. Not to mention reluctant or accidental landlords, who for a number of reasons may technically ‘own’ two properties.”

Propertymark has also expressed disappointed that the Scottish government is increasing the ADS which will cause many buy-to-let investors to pay more in taxes, calling the decision ‘wrong and out of touch’.

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.

“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.”