The Additional Dwelling Supplement (ADS) came into force in Scotland from 1 April 2016 and is a charge added to Land and Buildings Transaction Tax (LBTT) when an additional residential dwelling with a value of £40,000 or more is purchased, for example as a second home, holiday home, or rental property. ADS is currently set at six per cent of the total purchase price (with some exemptions and reliefs).

Introduced to protect and support opportunities for first time buyers, the legislation exempted registered social landlords (RSLs) from the charge, but local authorities were overlooked. This has meant that in some cases, local authorities making strategic acquisitions to add to affordable housing supply have incurred additional expenses.

Following consultation, the Scottish Government has now moved to relieve local authorities of the additional charge for affordable housing acquisitions.

Under changes to the ADS, the length of time a buyer moving between properties has to sell their original home in order to be able to reclaim ADS would also be extended from 18 months to 36 months.

Other changes include an exemption for people buying a new property to live in after divorce or separation if they are required by court to keep their previous home.

Further amendments will exempt buyers from paying ADS on a property for which missives have been signed when a separate property has been inherited in the meantime.

Public finance minister Tom Arthur said: “The Additional Dwelling Supplement is an important source of revenue and in 2022-23 raised £163 million to support vital public services. The tax works well in most cases but we have taken on board feedback about the way it operates in certain circumstances.

“We want everyone in Scotland to have an affordable home that meets their needs, which is why we’re extending the scope of relief for councils to help them increase their affordable housing stock without having to pay tax on additional properties.

“The amendments also take on board feedback that it can be tricky for people moving house to sell their original home within 18 months due to differences in supply and demand in the housing market across Scotland.

“I am grateful to everyone who responded to the Scottish Government’s consultation on these changes and look forward to working with MSPs as the legislation progresses through Parliament.”