How Scotland's affordable homes budget is bankrolled by buyers

Homebuyers, landlords, property investors, and second homeowners should give themselves a round of applause. The latest figures show that these are the people paying property taxes which are now equivalent to the entire affordable housing budget allocated by the Scottish Government.

These people – from the first-time buyer to the million-pound property owner – have supplied £714.2m through land and buildings transaction tax (LBTT) over the latest year from August 2024 to July 2025. This total is £110m higher than the previous 12-month period, when £604.2m was raised.

Whether revenue from LBTT is directly transferred to affordable housing is unknown but private buyers are now effectively funding a huge chunk of Scottish housing policy.

Last month recorded the highest ever figure for LBTT of £80.3m: the highest ever monthly charge from the additional dwelling supplement (ADS) paid by landlords, property investors and second home buyers at £28m; as well as the highest ever contribution from ordinary homebuyers with £52.3m.

Almost all the residential taxes raised came from properties sold for more than £325,001. The 19,560 transactions above this threshold collected £388.8m, which is 78.9 per cent of the total £493m raised in LBTT (this is the figure for residential sales with the ADS figures removed). This means that the average tax levied per transaction was £19,877.

Does anyone really believe that someone buying a property worth £325,001 is ‘rich’ and able to subsidise the rest of the Scottish economy? Are these really the people in Scotland with the broadest shoulders?

Meanwhile, landlords and property investors, while often vilified by politicians and others as the cause of the current housing emergency, paid £221.3m, which was almost a third of the LBTT total for the last year. This is a clear indication of just how crucial this group is in providing homes and substantial tax funding.

But it is questionable whether this is a sustainable, or even sensible, means of raising revenue. The Institute for Fiscal Studies (IFS) specifically criticised the policy this year stating that: “Scotland’s increase in the surcharge in land and buildings transaction tax (LBTT) on the purchase of second and rental homes, from 6 per cent to 8 per cent… continued a trend of increases in this ‘additional dwelling supplement’”, and “the move makes an already highly economically damaging tax even worse”. It continued: “It is not yet clear what the Scottish Government’s vision for tax policy is – but increases to LBTT are not consistent with any economically sensible strategy.”

The IFS, and many private investors, understands that the current LBTT policy is simply political posturing which makes little or no economic sense but plays up to the idea that punishing ‘the rich’ is the way forward.

While these figures indicate just how resilient and lively the Scottish property market remains there needs to be a level playing field with our UK counterparts. We need – as the IFS and others point out – a proper tax strategy in which there is a reasonable explanation of why these taxes are so high and what benefits accrue from them. Regardless of the current market buoyancy there is little doubt that continued higher property and income taxes will start to deter individuals and companies from future investments in Scotland if this situation is not addressed.