Do you pay LBTT and ADS when buying a new main home but keeping your old home to let in Scotland?

Introduction

A common LBTT question arises when a couple buy a new home together, but one of them already owns another property that will be kept and rented out. People often assume that because the new purchase will be their main residence, the Additional Dwelling Supplement (ADS) should not apply. They also often ask whether it helps if one buyer is a first-time buyer.

In Scotland, the answer depends on the LBTT rules for joint buyers, cohabitants, and replacement of a main residence. In many cases, ADS is still payable on the new purchase if an existing dwelling is retained.

The Question

Consider this general scenario. Two unmarried partners who live together are buying a property jointly as their new home. One partner already owns a home in their sole name. That existing property will not be sold. Instead, it will be kept and let out. The other partner has never owned a property before.

The key questions are:

• Is LBTT charged on the new home in the normal way, or does ADS also apply because the old property is being kept?
• Does it matter that the existing property is owned by only one partner?
• Does first-time buyer status for the other partner reduce the tax?

Nick’s Explanation

Nick’s explanation was that ADS applies if, at the end of the effective date of the transaction, any one of the joint buyers is treated as owning more than one dwelling and the purchase is not a replacement of that buyer’s only or main residence.

In anonymised form, his key point was:

“You are jointly purchasing a new home. One of you already owns another property, and that property will be retained and let out. Because it is not being sold, the buyer is not replacing their only or main residence. In those circumstances, ADS applies.”

He also explained that for joint purchases, it is enough for the conditions to be met by one buyer. In addition, where unmarried partners are cohabitants for the purposes of the legislation, a dwelling owned by one can be attributed to the other when applying the ADS rules.

Nick further noted that first-time buyer relief is not available on a joint purchase if one buyer already owns a dwelling, and in practice it does not displace ADS in this type of case.

The Law

LBTT is charged under the Land and Buildings Transaction Tax (Scotland) Act 2013. Where a residential purchase falls within Schedule 2A, ADS is charged on top of the normal residential LBTT rates.

The starting point is Schedule 2A, paragraph 2(1). Broadly, ADS applies if:

• the transaction is for a major interest in a dwelling,
• the chargeable consideration is £40,000 or more,
• at the end of the effective date the buyer owns more than one dwelling, and
• the buyer is not replacing the buyer’s only or main residence.

Paragraph 2(2) explains the replacement of an only or main residence concept. Broadly, there must be a disposal of the previous only or main residence and the new dwelling must be intended to be the new only or main residence.

For joint buyers, paragraph 5(2) is critical. It provides that the ownership and replacement conditions are treated as met if they are met in relation to any one or more of the buyers. So one buyer’s existing property ownership can trigger ADS for the whole transaction.

For couples and cohabitants, paragraph 6 contains attribution rules. In particular, paragraph 6(1)(b) treats a dwelling owned by the buyer’s cohabitant as being owned by the buyer for the purposes of paragraph 2(1)(c).

As to the rate, paragraph 4(2), as amended, sets the ADS rate at 8% with effect from 5 December 2024.

If ADS is paid because the former main residence has not yet been sold, paragraph 8 may allow repayment, but only if the statutory conditions are met. The key point is that the property later disposed of must have been the buyer’s only or main residence within the relevant 36-month period.

Analysis

Step 1: Identify the transaction being taxed.

LBTT is charged on the purchase of the new property. The question is whether that purchase attracts only the normal residential LBTT rates, or the normal rates plus ADS.

Step 2: Ask whether, at the end of the effective date, the buyers will own more than one dwelling.

Yes. After completion, the couple will own the new home, and one partner will still own the existing property. Because they are cohabitants for the purposes of the legislation, the existing property is treated as relevant to both when applying the ADS rules.

Step 3: Ask whether the new purchase is a replacement of an only or main residence.

On these facts, no. The existing home is not being sold. It is being retained and let out. That means there is no disposal of the former main residence at the time of the purchase. So the replacement test is not met on completion.

Step 4: Apply the joint buyer rule.

Even if only one partner has existing property ownership, paragraph 5(2) means that is enough to trigger ADS for the joint purchase. The fact that the other buyer has never owned property does not prevent ADS from applying.

Step 5: Consider first-time buyer relief.

First-time buyer relief does not assist here. A joint purchase does not qualify if one of the buyers is not a first-time buyer. More fundamentally, the existence of an additional dwelling and the failure to replace a main residence mean ADS applies in the usual way.

Step 6: Consider whether ADS can later be reclaimed.

Possibly, but only if the statutory repayment conditions are satisfied. The later disposal must be of the former only or main residence, not just any additional property. If the retained property was the buyer’s main residence and it is sold within 36 months of buying the new home, and the new home is the new main residence, a repayment claim may be possible. If the old property is simply kept as a buy-to-let, there is no repayment.

Outcome

In this scenario, the purchase of the new home will generally attract:

• the normal residential LBTT rates, and
• ADS at 8% on the chargeable consideration.

That is because one of the joint buyers already owns a dwelling, the couple are cohabitants for the purposes of the legislation, and the old home is being retained rather than sold. The purchase is therefore not treated as a replacement of an only or main residence at completion.

The fact that the other buyer is a first-time buyer does not change that result.

Practical Steps

If you are assessing your own position, work through the following points carefully:

1. Confirm whether the purchase is in Scotland and therefore within LBTT rather than SDLT.
2. Check who will be legal buyers of the new property.
3. List all dwellings owned by each buyer at the end of the effective date.
4. Consider whether any buyer is married, in a civil partnership, or a cohabitant whose ownership must be attributed under Schedule 2A.
5. Ask whether a previous only or main residence is being sold before or at the same time as the new purchase.
6. If not, consider whether a later sale of the former main residence within 36 months could support an ADS repayment claim.
7. Do not assume first-time buyer status of one buyer will override the ownership position of the other buyer.
8. Before exchange or completion, ask a Scottish conveyancer or LBTT specialist to calculate both the standard LBTT and any ADS due.

Conclusion

Where unmarried partners living together buy a new home jointly in Scotland, and one partner keeps their existing home to let rather than selling it, ADS will usually apply to the new purchase. The tax is charged on the new property transaction, not on the old property being retained. A first-time buyer joining in the purchase does not prevent ADS from applying.

Legal References Used

• Land and Buildings Transaction Tax (Scotland) Act 2013
• Land and Buildings Transaction Tax (Scotland) Act 2013, Schedule 2A, paragraph 2(1)
• Land and Buildings Transaction Tax (Scotland) Act 2013, Schedule 2A, paragraph 2(2)
• Land and Buildings Transaction Tax (Scotland) Act 2013, Schedule 2A, paragraph 4(2)
• Land and Buildings Transaction Tax (Scotland) Act 2013, Schedule 2A, paragraph 5(2)
• Land and Buildings Transaction Tax (Scotland) Act 2013, Schedule 2A, paragraph 6(1)(b)
• Land and Buildings Transaction Tax (Scotland) Act 2013, Schedule 2A, paragraph 8(1)

This page was last updated on 22 March 2026.

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