Scotland has become the costliest part of the UK to be a landlord, following a controversial tax hike announced in the Scottish Budget by Shona Robison, the Cabinet Secretary for Finance and Local Government.
While the Budget promised to prioritize the needs of Scotland’s people, critics argue it does little to address the housing crisis and risks further exacerbating the shortage of private rental properties.
A key measure in the Budget is an increase in the Additional Dwelling Supplement (ADS) under the Land and Buildings Transaction Tax (LBTT).
This surcharge, applied to second homes, rental properties, and holiday homes, will rise from 6% to 8%.
OUT OF TOUCH
Critics, including Timothy Douglas, Head of Policy and Campaigns at Propertymark, have labelled the move “out of touch” with Scotland’s housing needs.
He warns: “Raising yet more taxes on the private rented sector will do nothing to tackle the housing emergency and will only raise rents further, putting the burden of these costs on tenants.”
With existing rent controls and upcoming energy efficiency regulations already adding pressure to landlords, the increase may discourage new entrants to the rental market and push existing landlords to exit.
AFFORDABLE HOUSING
The Budget includes £768 million for the Affordable Housing Supply Programme, aimed at delivering over 8,000 new properties for social rent, mid-market rent, and low-cost home ownership in the next year. The initiative is part of the government’s ambition to build or acquire 110,000 affordable homes by 2032.
Robison framed this as a step toward addressing child poverty and improving housing access. However, analysts say this effort may fall short of offsetting the impact of declining private rental availability.
BUSINESS AND CLIMATE GOALS
The Scottish Government is extending support to businesses with a freeze on the Basic Property Rate at 49.8p and maintaining the Small Business Bonus Scheme, which protects over 200,000 small properties. Hospitality premises will receive a 40% rates relief in 2025–26, capped at £110,000 per business, with 100% relief for those on islands and in remote areas.
On climate change, £300 million will go toward the Heat in Buildings Programme, maintaining funding levels to improve energy efficiency across homes and businesses. An additional £25 million will support new green energy supply chain jobs.
COUNCIL TAX FLEXIBILITY
While income tax rates remain unchanged, local councils now have the freedom to raise council tax as needed. Robison downplayed fears of large increases, but some councils, like Perth and Kinross, are already considering hikes as high as 10%.
While the Budget has been praised for its investment in affordable housing and green initiatives, critics argue it unfairly penalizes private landlords and could undermine the rental market at a time of unprecedented demand.
Scotland’s balancing act between funding public services, tackling the housing crisis, and supporting businesses leaves many questioning whether the new measures will deliver the promised priorities – or deepen existing challenges.
Douglas adds: “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”
SIMPLY WRONG
And he says: “Additional Dwelling Supplement under Land and Buildings Transaction Tax from 6% to 8% 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.”
