1. Council tax premiums on second homes

Scottish councils can charge a premium of up to 100% on council tax for second homes. This means double the standard bill. Edinburgh charges the full 100%. Highland Council, Argyll and Bute, and Fife have also implemented premiums.

The premium applies to any property that is not your sole or main residence and is not on the non-domestic rates list. If your holiday let does not meet the self-catering threshold (see Section 2), it stays on council tax and the premium applies.

2. Self-catering rates (non-domestic)

To qualify for non-domestic rates instead of council tax, a property in Scotland must be:

• Available for letting for 210 days or more per year.
• Actually let for 70 days or more in the previous 12 months.

These thresholds were tightened from April 2022 (previously only 140 days available, no actual-letting requirement). The Scottish Assessors can request evidence of actual letting activity.

Properties on non-domestic rates may qualify for the Small Business Bonus Scheme (100% relief if rateable value is under 15,000 pounds). This can reduce the bill to zero, the same as SBRR in England. For comparison, see our guide to Airbnb council tax in the UK.

3. LBTT Additional Dwelling Supplement

When purchasing a second home or investment property in Scotland, you pay the Land and Buildings Transaction Tax (LBTT) Additional Dwelling Supplement (ADS) on top of standard LBTT rates.

The ADS rate was increased from 6% to 8% in December 2024. This is calculated on the total purchase price, not just the amount above a threshold. For current rates, thresholds and worked examples, see the Revenue Scotland guidance on the Additional Dwelling Supplement.

For a 250,000 pound property, the ADS alone is 20,000 pounds. This is a significant upfront cost that affects the investment case for Scottish holiday lets.

4. Short-term let licensing

All short-term lets in Scotland require a licence from the local authority under the Civic Government (Scotland) Act 1982 (as amended 2022). Existing hosts had until 1 April 2024 to apply.

Licence conditions include: safety standards (fire, gas, electrical), insurance, maximum occupancy, and planning permission where required. Edinburgh operates a short-term let control area where planning permission is needed to use a property for short-term letting. For a full breakdown, see our guide to Edinburgh short-let licensing and levy.

5. Income tax

Scottish taxpayers pay Scottish Income Tax rates on non-savings, non-dividend income. These differ from the rest of the UK. All rental income from Scottish properties must be declared to HMRC.

Scotland has five income tax bands (starter at 19%, basic at 20%, intermediate at 21%, higher at 42%, and advanced at 45%), compared to three in the rest of the UK. Rental income stacks on top of other income, so a Scottish landlord with employment income may reach the 42% higher rate sooner than an equivalent taxpayer elsewhere in the UK.

The FHL tax regime was abolished from April 2025 UK-wide. Scottish holiday let owners have lost capital allowances, unrestricted mortgage interest deduction, and Business Asset Disposal Relief. Mortgage interest is now restricted to the 20% basic rate credit. For the full breakdown, see our guide to Airbnb tax in the UK.

6. How to reduce your tax burden

• Meet the 210/70-day threshold to move to non-domestic rates and qualify for Small Business Bonus Scheme.
• Claim all allowable expenses: mortgage interest (20% credit), repairs, insurance, cleaning, management fees, platform fees.
• Use dynamic pricing to maximise revenue during Edinburgh Festival, Hogmanay, and summer peak.
• Consider professional management to increase occupancy above the 70-day threshold. Management fees are deductible. For costs, see our guide to costs of running a holiday let.
• Get a tax adviser who understands Scottish property tax specifically.

This guide is general information, not tax or legal advice. Scottish tax rules differ from the rest of the UK. Always consult a qualified adviser.