With exciting cities, magical islands, wild countryside and fantastic food and drink, Scotland is an appealing holiday destination.
However, if you’re considering buying a holiday property in Scotland, there are a few differences in rules and regulations when compared to those in England. To help you understand holiday let legislation in Scotland before you make a purchase, here we take a look at everything from Land and Buildings Transaction Tax (LBTT) to business rates.
Stamp Duty in Scotland: Land and Buildings Regulation Tax
When you buy a residential property in Scotland, you’ll have to pay Land and Buildings Transaction Tax (LBTT), not Stamp Duty as in England. You’ll have to pay this if you’re buying a residential property worth £145,000 or more, or £40,000 if it’s a second home.
LBTT was introduced in Scotland
in April 2015 to replace the Scottish Stamp Duty Land Tax (SDLT). It is administered by Revenue Scotland, with support from Registers of Scotland.
What are the LBTT rates?
You’ll have to start paying LBTT for residential property worth more than £145,000. As with Stamp Duty, the rates for this are tiered and fall into different price bands, depending on the price you pay for your property.
*Percentage figures show LBTT and ADS (Additional Dwelling Supplement) rates combined. ADS is calculated in addition to LBTT and is applied at 6% to the total purchase price above £40k.
**An additional dwelling purchased for less than £40k will attract 0% tax. For purchases from £40k to £145k, the rate will be 6% on the full purchase price.
So, if you’re buying your only property for £270,000, you’d pay 0% for the first £145,000, 2% for the portion of the property that falls into the first taxable band (£105,000, making the tax £2,100) and 5% of the portion that falls into the second taxable band (£20,000, making the tax £1,000) – so £3,100 in total.
There’s also an additional 6% Additional Dwelling Supplement (ADS) on top of LBTT if you’re buying a second or additional home worth more than £40,000. This is a slab tax – i.e. for the whole price of the property rather than a proportion of it. So, using the £270,000 property price above, if you were buying this as a holiday let, you’d also need to pay the ADS of £16,200. This would give you a total tax bill of £19,300.
If you’re buying a property for rental in Scotland, business rates are another cost to factor in. Business rates are a tax on non-domestic properties that help to pay for local council services.
If your property is available to let for 140 days or more over a year, and actually rented out for 70 days or more a year, you'll be liab;e for business rates.
How are business rates different in Scotland?
The way business rates are calculated differs between Scotland and England.
In Scotland, business rates are worked out based on the property’s rateable value, which is calculated by a local assessor based on its estimated open market rental value. To get the rateable value, this is then multiplied by the ‘poundage rate’, which is set by the Scottish government.
In England, business rates are also calculated by the property’s rateable value but this is determined by its open market value (currently from April 1, 2015) based on an estimate by the Valuation Office Agency. This is also then multiplied by a poundage rate, which is set by the government.
In Scotland, you may be entitled to tax relief under the Small Business Bonus Scheme if the rateable value of an individual property is less than £20,000, and you may not have to pay any business rates if the rateable value is less than £12,000.
Hospitality businesses in the Scottish Islands are eligible for 100% busines rates discount (up to a maximum of £110,000), a relief of which has been extended to include the 2024-5 financial year.
Council Tax in Scotland for second homes
If you don’t pay business rates on your property, you may have to pay Council Tax, which is based on the property being a second home. On this basis, a second home is classed as one that is no-one’s main residence but which is occupied for at least 25 days a year.
You may be entitled to a council tax discount for this second home at the council’s discretion. This can be anything from 10-50%, but purpose-built holiday lets could be entitled to a 50% discount. From 1 April 2024, Scottish councils are allowed to charge up to a 100% premium (so double council tax) for second homes, including holiday lets.
Benefit from Dedicated Account Management
Our personal account management service offers support and advice to get the most from your property, with extended guidance offered to new owners in their first year.
Building standards and planning permission in Scotland
If you’re looking to convert a property for let in Scotland or to build holiday homes, you should also look into Scotland’s building standards system and planning system as they differ to those in England.
You'll have to meet the Scottish Building Standard Regulations as set out in handbooks which is enforced by local government. You can find technical information and more detail on the Scottish Government's website.
You’ll also have to gain planning permission if you’re building something new and, possibly, if you’re converting a property too. A good idea would be to speak to the local council ahead of getting any designs drawn up so you have a clear idea around what you can and can’t do.
Energy Performance Certificates in Scotland
An Energy Performance Certificate (EPC) is a legally required document that measures how energy-efficient your property is. An EPC is required for any domestic or commercial building that is available for buying or renting. The fines for not having an Energy Performance Certificate can amount to £200 per day.
You will need to book an EPC survey in with your local Domestic Energy Assessor or Home Inspector, who will make a visit to your property in order to help calculate your EPC rating. Your energy performance rating is calculated depending on a number of factors, including the type, age, dimensions and heating of your property.
Holiday let food safety: Prepacked for Direct Sale (PPDS) Labelling Guidance
What is the Prepacked for Direct Sale Labelling Guidance?
The labelling guidance for PPDS is a requirement to ensure food businesses in Scotland that produce Prepacked for Direct Sale food are clearly labelling ingredients and allergens in their pre-packed products. PPDS is a food product that is pre-packed and then offered to customers within the same place.
There are 14 allergens that must be clearly labelled on any PPDS product that contains them. These are:
Peanuts
Nuts such as almonds, brazil, cashews, hazelnuts, macadamia, pecan, pistachios, walnuts
Cereals containing gluten such as barley, oats, rye, wheat
Eggs
Fish
Milk
Soybeans
Lupin seeds and flour
Crustaceans such as crabs, crayfish, lobster, prawns
Molluscs such as mussels, oysters, snails, squid and whelks
Mustard
Celery and celeriac
Sesame
Sulphur dioxides/sulphites
When did it come into effect?
The labelling guidance for Prepacked for Direct Sale food was amended to include the above regulations on Friday 1st October 2021.
Why has the law been changed?
This amendment was brought into place because the current laws surrounding the labelling of PPDS food were deemed insufficient. A campaign was launched as a result of the death of Natasha Ednan-Laperouse, who was subject to an allergic reaction to an ingredient in a prepackaged product that was not labelled.
How does the new labelling guidance laws affect holiday lets?
Food businesses are the main focus for these amendments, and as holiday lets are self-catering, you will not be impacted as severely. However, one area that must now be taken more seriously is the labelling of PPDS items in your guest welcome packs.
Offering a welcome pack is a great way to make a first impression, however it is now a legal requirement to label any food or drink items that you give to your guests with all ingredients and allergens. It is also strongly advised not to take individual products from multi-packs to avoid risk of information being missed out.
Another thing to consider is to seal all food items that you leave for guests, as some reactions can be triggered by the smell of certain allergens.
If you are unsure of the procedures you need to follow, head to the Food Standards website for further information.
Scotland Short Term Accommodation Licence Scheme
The Short Term Accommodation Licence in Scotland is a scheme that is being introduced in order to control the number of secondary properties in the country, with an aim to allow more opportunities for residential properties.
The initiative means that by 1st January 2025, all existing short-term let properties in Scotland will need a licence in order to operate.
Here are a list of key dates:
Early 2022: Finalising and publishing of licensing scheme guidance
1st October 2022: All licensing authorities must have the ability to receive licence applications from this date. Anyone who is new to short-term letting must obtain a licence from this date before accepting bookings
1st October 2023: All existing short-term let operators must have applied for a licence by this date to continue operating
1st January 2025: All existing operators of short-term lets must hold a licence to operate
* At the time of updating (21/12/23), Sykes Cottages has taken all reasonable care to ensure that the information contained in this article is accurate. However, no warranty or representation is given that the information is complete or free from errors or inaccuracies. Generic information is contained within this article and each individual’s financial affairs are different, further advice should be sought.
As a holiday letting owner you are responsible for compliance with health & safety laws, regulations and guidance, and for having suitable insurances in place (not Sykes Holiday Cottages or its brands (Sykes)). From time to time, Sykes shares information with you on the topic of health and safety and insurance. When it does so, it is not providing you with advice (legal, financial, tax or otherwise); please seek your own as you see fit. In addition, it is not making any representations or warranties about the information being complete or free from errors or inaccuracies. Sykes shall not be liable for any loss or damage arising under or in connection with your reliance on it.
Charlotte Beautement, Holiday Let Content Writer
.jpeg)
.jpeg)
