Second home buyers and property investors contributed over a quarter of all property taxes north of the border in the last year, according to DJ Alexander Ltd.

The property firm analysed the latest statistics on Land and Building Transaction Tax (LBTT) and revealed that buyers paying the additional dwelling supplement (ADS), which is liable on second homes, contributed £179.1m between May 2022 and April 2023. This represented 27.9% of the £642.4m collected in tax for the year.

The latest two months recorded the two highest ever amounts of ADS collected since the tax was initiated in April 2016. The figure for March was £17.8m, which was 37.5% of all residential LBTT collected that month. For April it was £17.3m, which represented 37.1% of the total tax take.

David Alexander, chief executive of DJ Alexander Ltd, commented: “These figures are remarkable and indicate that landlords and second homeowners regard Scotland as an attractive place to invest in. 

“While these figures relate to both investors and those wanting to own another home, my suspicion is that the majority of these buyers are landlords who rightly recognise that Scotland is an area with enormous demand for property rentals and extremely limited supply. The result of this over the last 10 months or so has been the largest rent rises in the UK.”

Alexander added: “Given that the last two months have seen the highest ever amount of additional dwelling supplement, it is a surprise that the increased rate of this tax from 4% to 6% does not seem to have had a dampening effect on the market. I am sure that this is because demand in the private rented sector (PRS) is at a record level.

“I believe that landlords and investors can continue to produce a good return from the PRS as people want to live in Scotland. In particular, they want to rent in Edinburgh and Glasgow, which have seen enormous levels of demand over the last few years, and I believe that this is likely to continue for some considerable time to come.”