Do you pay Scottish ADS if you rent in England but own an overseas property?

Introduction

People often ask whether Scotland’s Additional Dwelling Supplement (ADS) applies when they are buying a new home in Scotland but already own a property elsewhere in the world. The position can be confusing where the buyers are currently renting, the other property is overseas, and that overseas property used to be their main home many years ago.

The key questions are usually:

• does the overseas property count as an additional dwelling for ADS purposes, and
• if ADS is paid, can it later be reclaimed when that overseas property is sold?

The answer depends mainly on two things: the market value of the overseas property at the effective date of the Scottish purchase, and whether the buyers are truly replacing a previous only or main residence within the statutory time limits.

The Question

A married couple have been renting their home in England for several years and now want to buy a new main residence in Scotland for about £250,000. They do not own the English property they currently live in.

They do, however, jointly own a residential property abroad. That overseas property was their main residence many years ago, but it has since been let out and has not been their home for a long time. Its official local tax value is below £40,000, but they believe its actual market value may be above £40,000.

They want to know:

• whether ADS is payable on the Scottish purchase, and
• whether, if ADS is paid, it could be reclaimed if the overseas property is sold within 18 months.

Nick’s Explanation

Nick’s core explanation was that the answer lies in Schedule 2A of the Land and Buildings Transaction Tax (Scotland) Act 2013.

He explained that ADS applies if, at the end of the day of the transaction, the buyers own more than one dwelling and are not replacing their only or main residence.

He also pointed out an important exception: if the additional property has a market value of less than £40,000, it is disregarded and does not count as an additional dwelling for ADS purposes.

In anonymised form, his reasoning can be summarised as follows:

If the overseas property is genuinely worth less than £40,000 at the effective date of the Scottish purchase, it is ignored for ADS purposes, so no ADS should arise.

If its market value is above £40,000, ADS applies. A later sale of that overseas property would not generate a repayment in this scenario because the property stopped being the buyers’ main residence many years before the new purchase, so the replacement of main residence conditions are not met.

He also highlighted the practical importance of obtaining a defensible market valuation for the overseas property as at the date of the Scottish transaction.

The Law

The relevant rules are in Schedule 2A to the Land and Buildings Transaction Tax (Scotland) Act 2013.

In broad terms:

• Paragraph 2 sets out the basic charge to ADS.
• ADS applies if, at the end of the effective date of the transaction, the buyer owns more than one dwelling and the purchase is not treated as a replacement of the buyer’s only or main residence.
• A dwelling worth less than £40,000 is disregarded for these purposes.
• Paragraph 8 provides for repayment of ADS in certain replacement-of-main-residence cases, where the old main residence is sold after the new one is bought.

For a repayment under paragraph 8, the sold dwelling must have been the buyer’s only or main residence at some point in the 18 months ending with the effective date of the new purchase, and it must then be disposed of within the permitted period after the new purchase.

Where a property ceased to be the buyer’s main residence long before that 18-month look-back period, the repayment conditions are not satisfied.

Analysis

Step 1: Identify what the buyers own at the end of the day of the Scottish purchase.

On the facts given, the buyers will own the new Scottish home and will still own the overseas property. Because they are renting in England, they are not disposing of an owned UK home when they move. So the overseas property is the critical issue.

Step 2: Decide whether the overseas property counts as a dwelling for ADS purposes.

An overseas residential property can count. The fact that it is abroad does not, by itself, take it outside ADS.

Step 3: Apply the £40,000 rule.

If the overseas property’s market value is less than £40,000 at the effective date of the Scottish purchase, it is disregarded. In that case, the buyers are not treated as owning an additional dwelling for ADS purposes, so ADS should not apply.

If the overseas property’s market value is more than £40,000, it counts. In that case, the buyers will own more than one dwelling at the end of the day of the transaction.

Step 4: Ask whether the Scottish purchase is a replacement of the buyers’ only or main residence.

Although the buyers are moving from a rented home in England into an owned home in Scotland, the replacement test in Schedule 2A works by reference to disposal of a previous only or main residence that they owned. Here, they are not selling the rented English property because they do not own it.

The only owned dwelling in the background is the overseas property. But that property stopped being their main residence many years ago and has been let out since.

That means the Scottish purchase is not treated as replacing their only or main residence for ADS purposes if the overseas property counts as an additional dwelling.

Step 5: Consider whether ADS can later be reclaimed.

The repayment rules are strict. The old property being sold must have been the buyers’ only or main residence at some point during the 18 months before the purchase of the new home.

Because the overseas property was not their main residence within that 18-month period, a later sale would not qualify for repayment, even if the sale takes place within 18 months after the Scottish purchase.

Step 6: Calculate the likely tax result.

On a purchase price of £250,000, if ADS applies at 8%, the ADS charge would be £20,000.

So the practical outcomes are:

• if the overseas property is below £40,000 market value, no ADS;
• if it is above £40,000 market value, ADS is due and cannot be reclaimed later on these facts.

This is not an “uninhabitable” case, but it is worth noting that where buyers try to argue that a property should be ignored because it is not suitable for use as a dwelling, the threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

Outcome

If the overseas property is genuinely worth less than £40,000 on the effective date of the Scottish purchase, it should be disregarded and ADS should not be payable.

If the overseas property is worth more than £40,000, ADS is likely to apply to the full purchase price of the Scottish home. On the facts described, that ADS would not later be reclaimable on a sale of the overseas property, because the statutory replacement-of-main-residence conditions are not met.

Practical Steps

Anyone in this position should take these steps before completion:

• obtain a reliable market valuation of the overseas property as at the effective date of the Scottish purchase;
• make sure the valuation addresses actual market value, not just a local tax or administrative valuation;
• keep evidence showing how the valuation was reached, especially if the overseas market is informal or difficult to compare with UK practice;
• check the ownership position carefully, including joint ownership and any local law issues affecting value;
• review whether any property being sold was in fact an only or main residence within the 18 months before the new purchase;
• ensure the LBTT return reflects the correct ADS treatment based on the facts at the effective date.

In cross-border cases, the valuation point is often the decisive one.

Conclusion

Owning an overseas property can trigger Scottish ADS even if you currently rent in England and are buying your next main home in Scotland. The main dividing line is whether that overseas property is worth at least £40,000 at the date of purchase. If it is below that threshold, ADS should not apply. If it is above that threshold, ADS is likely to be due, and a later sale will not usually produce a refund unless the old property was your main residence within the required 18-month period.

Legal References Used

• Land and Buildings Transaction Tax (Scotland) Act 2013, Schedule 2A
• Land and Buildings Transaction Tax (Scotland) Act 2013, Schedule 2A, paragraph 2
• Land and Buildings Transaction Tax (Scotland) Act 2013, Schedule 2A, paragraph 8
• Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799

This page was last updated on 22 March 2026.

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