Scotland’s virtue-signalling second-home taxes are driven by green-eyed envy

OUTRAGE IS SIMMERING around Labour-run Edinburgh City Council’s plans to introduce a 300 per cent council tax “premium” on second homes. It is the crystallisation of growing attempts to tax wealth in addition to income in Scotland and the rest of the UK.

Before I discuss the issues around the premium, let’s get something straight, for the avoidance of doubt. It’s not a premium but a surcharge. A premium is either an insurance and investment payment (and it’s neither of those) or a higher price than the standard quoted rate that is paid in return for receiving better quality or extra features. Owners paying council tax on a second home do not get a vote in council elections – it is taxation without representation – and that can hardly be called an extra or higher quality service.

A surcharge is an extra fee applied to a quoted or standard price that would not normally be paid, often to make up for higher costs, such as a fuel surcharge, or for particular categories of user – such as an owner being fleeced simply because the property is a second home!

When it a surcharge is placed on council tax, it means the normal 100 per cent charge for any particular band (A to H) has the surcharge added, so Edinburgh’s second home surcharge of 300 per cent results in a council tax bill of 400 per cent. A 100 per cent surcharge doubles the council tax.

Let us look, then, at what a 300 per cent surcharge will mean for council tax bills in Edinburgh.

As we can see, the second home surcharge takes the council tax charge for a property in Band A to a staggering £4,336 – which is higher than the regular charge on the most expensive properties in Band H of £3,983. The second home surcharge takes a Band D property (often considered to be the average) from £1,626 to £6,504, while a Band H property would go from just under £4,000 to an eye-watering £15,835. All of these prices are before water and wastewater charges are added.

It will probably not surprise readers to know that I am told by those attending Edinburgh council meetings that Labour is not even the strongest supporter of these sort of taxes, but that the Liberal Democrats, SNP and Greens are the keenest advocates.

Bear in mind that this Council Tax and its surcharge are annual charges, not one-offs, and of course they never goes down; they always increase – usually at a rate higher than inflation. This year Labour increased Edinburgh’s council tax by 4.0 per cent.

Not to be outdone, Labour-controlled Midlothian Council not only increased its Council Tax by nine per cent, but also introduced this April a graduated council tax surcharge reaching as high as 500 per cent (a 600 per cent total charge) for long-term empty properties and second homes. It will affect only 35 properties and is expected to raise £200,000 in total. Only the sole Conservative councillor, Peter Smaill, opposed the policy.

In Midlothian Council, both second homes or long term empty properties of over there years would see Band A move from £1,211 to £7,266; Band D from £1,816 to £10,896; and Band H from £4,450 to £26,698 – with water and wastewater charges of £1,305 taking Band H to £28,803.

Council Tax was originally called the Community Charge – which reflected that it was a charge for using local services, such as education, social work, refuse collection and road maintenance, amongst others.

The idea that a property owner should pay any surcharge at all for a second home breaks with that social contract, as the possibility of using the council’s services proportionately diminishes rather than multiplies when you have two properties. Children of a property owner can only use one school at a time, you can only drive one car on the council’s roads at a time, and a person can only use social services in one place at a time. Indeed, the fact such owners use proportionately less in the way of council services once meant they received a small discount. Now they are just a means for politicians to raise taxes to pay someone else’s benefits or fund a political bribe (commonly known as a subsidy). Reaction from owners has been predictably bewildered and critical.

Wealthier people already contribute a higher share towards council services because they pay a higher share of the country’s overall tax burden that funds the grant aid, through significantly higher rates of income tax as well as their elevated contributions to CGT and greater consumption through VAT. Scots in the top two income tax rates form only 5.2 per cent of taxpayers but contribute 38.2 per cent of Scottish income tax revenues.

The second home is unlikely to be a second of two properties both in Edinburgh (although it can happen, it is rare) but rather the property of someone with a primary residence in London or abroad who then spends occasional time in Edinburgh (or at least less time than in the primary residence). It can be someone living in Edinburgh with their own property who gets a contract job that requires living elsewhere in the UK or abroad but doesn’t want to rent out their property or sell it – probably because they intend to return to Edinburgh. Also, such is the price of Edinburgh property that it could be difficult to get back onto the Edinburgh property ladder, where prices tend to rise faster than the rest of Scotland (the same goes for selling property in London), so people hold on to their property.

punishing second-home owners with higher council taxes will do little to solve any housing crisis

This is not an uncommon situation for many consultants and contract workers, be they engineers, IT specialists or business advisers. I worked in Botswana and Trinidad, on long-term contracts with a residency, but still had a home in Scotland. It was used regularly as my Scottish base on business and visiting friends and relatives – and I paid the council tax. To avoid paying a council tax on a property, it has to be unoccupied and unfurnished. Nowadays that property would have been subject to a surcharge even though I used little, if any, of the council’s services.

Eventually as I came back to Scotland less often, renting out made more sense, but it had its own costs and the regulations made it a real pain in the neck and barely profitable (ideally you need a handful of properties to share admin costs if you want to make money from renting). Once further regulations started being applied that would make renting more onerous, it was sold (to a couple from England – so it didn’t contribute to solving the housing shortage). The idea of punishing second-home owners with higher council taxes or restrictive legislation so they will release a home to the market will do little to solve any housing crisis – the numbers are inconsequential. The solution requires changes to planning laws that make housing development more likely.

As if the council tax surcharge is not bad enough, there is another tax increase coming down the tracks – and it is a shocker. Quite separately – but as part of the overall strategy of raising so-called wealth taxes “until the pips squeak”, as Labour Chancellor Denis Healey infamously put it – the UK and Scottish Governments are planning to introduce new council tax liabilities at the top end of property values that will act as “mansion taxes”. This is in response to the repeated calls for a wealth tax by far-left think tanks and politicians.

In Scotland, the SNP is proposing two new tax council tax bands, I and J – while in England Rachel Reeves announced in her second Budget of 2025 a High Value Council Tax Surcharge, on top of the Band H council tax charge. Already known as “the mansion tax”, it is to be introduced by April 2028. It will have four flat-rate tiers rather than using a Band D proportional multiplier to generate additional tiers. The properties targeted will be based on 2026 valuations by the Valuation Office Agency:

The liability will, in England’s case, be due from the homeowner rather than the occupier, irrespective of whether the property is a second home or rented, and will be collected by the local authority together with council tax.

In Scotland, the SNP proposes Band I will be based upon Band D with a multiplier of 2.886, while Band J will be based upon a multiplier of 4.628 – in Edinburgh this would mean an annual liability of £4,692.28 for Band I and £7,525.35 for Band J.

These would be punishing enough for any single homeowner, but there will be some situations where the property affected is a second home and the new bands will be liable for any council surcharge amount. If an owner’s primary residence happened to be in Aberdeen or Aldershot – possibly because they were working there but keeping their Edinburgh property in use as a second home – the council’s second home surcharge would turn Edinburgh’s mansion tax liability into £18,769.12 for Band I and £30,101.43 for Band J.  In Midlothian Band J would be £5,241 and Band H would be £8,404 – but with its highest punitive second home surcharge it would become £31,446 for Band I and £50,427 for Band J.

In England, the mansion tax, being a new flat rate tax on all properties above £2m, would not treat first or second homes differently – but the SNP policy will help keep Scotland the highest-taxed jurisdiction in the UK

Any idea that these sort of taxes will not distort the property market is nothing other than dogmatic zealotry. People will alter their behaviour, looking for legal workarounds and may simply sell up. Some will have to take a hit on Capital Gains Tax which, on property, usually taxes inflationary growth in value rather than value rising due to improvements. What it will not do is provide housing for rough sleepers or people on social housing waiting lists. It is purely a policy built on destructive green-eyed envy that punishes ambition and success.

Until the UK Government is replaced and someone starts to repair the damage done by Chancellor Rachel Reeves, we will all continue to travel down the road towards being a high-tax country. To save Scotland, we shall have to wait until the 2031 Holyrood election. Either way, having a second home is going to be punished irrespective of its value or the reason it gained that status.