Private Client Associate Kathryn Johnston, explains why even as a savvy house hunter, you can benefit from professional advice in The Scotsman. Read the full article below, republished by kind permission of The Scotsman:

Many people like to think of themselves as savvy house-hunters, but there really is no substitute for professional advice to avoid expensive pitfalls. After all, why pay more tax than you need to?

There’s nothing like a furore over tax to stoke an argument. To some, tax planning is an entirely sensible process to reduce liabilities, but to others it’s a grey area that involves dodging your responsibilities. I suspect such polar opposite opinions will rarely find common ground.

A Scottish politician has recently been accused by opponents of dodging tax by building a property portfolio in the north of England rather than Scotland, thus avoiding higher rates imposed by his own government. In fact, the current First Minister himself is on record as referring to altering tax affairs as technically possible, but morally wrong.

But as Shakespeare’s Hamlet might say, there’s the rub. By shifting your property portfolio south of the border, you can sometimes save a considerable sum of money on the Additional Dwelling Supplement (ADS) and Land and Buildings Transaction Tax (LBTT). For all the apparent tax outrage this politician’s planning has caused, it has also highlighted the differences between Scotland and England and the considerations buyers should, quite sensibly, take into account around second home ownership.

And for that, whatever side of the divide you stand, professional advisers should be grateful that an important issue now has a higher profile. It really is vital to think hard about the location of your second home and crucially to take professional advice at the outset of your house hunting.

ADS in Scotland currently sits at 8 per cent, having been bumped up from 6 per cent by the Scottish Government from December 2024. Indeed, it sat at what now seems a paltry 3 per cent up to 25 January 2019, so it’s now much more of a material consideration for second home buyers. Its southern counterpart, known as Stamp Duty Surcharge, stands at 5 per cent. The rates at which LBTT is charged is also different and more punitive in Scotland for all purchase prices between £325,000 and £1.5 million. However, home ownership really is about location, location, location and it may well be that paying slightly more for your favoured spot is a price worth paying.

But here is an unintended consequence – there’s some leeway in the system to allow for the vagaries of the property market as buyers, who are simply looking to move house, often conclude a deal for a second home before they have managed to sell their own.

However, any leeway was in short supply for one client who was looking to sell their original property, having purchased a new home first, within the allowable time frame – at that stage 18 months. One family member, however, became seriously ill which rendered the new home they’d purchased totally unsuitable. They then sold this second property and tried to reclaim the ADS paid, but this application was turned down by Revenue Scotland, which collects devolved taxes.

The organisation, whilst sympathetic to our clients, confirmed that, unlike HMRC, it had no discretion to review cases and must simply apply the legislation. In short, if conditions are not met, there is no repayment.

Moving house understandably often appears near the top of the charts of life’s most stressful events. Taking professional advice as early as possible is one way to mitigate that – and it could also bring financial benefits.

Estate planning specialist solicitors, Edinburgh

Kathryn Johnston is an Associate in Murray Beith Murray LLP’s Asset Protection Group and specialises in IHT and estate planning.

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