Scottish Budget 2026-27

With 2026 marking an election year for the Scottish Parliament and public finances being under strain, expectations were for a cautious approach to tax and spending. While sweeping changes were unlikely, the Scottish Budget still included several notable tax measures worth highlighting.

The key announcements are as follows:

Council tax

Two new council tax bands will apply for high value homes. The change will apply to homes valued above £1 million, with Band I applying to properties valued between £1 million and £2 million and Band J applying to properties valued above £2 million. The new bands will be based on up-to-date valuations, although the remaining bands will continue to be based on historic values.

The Scottish government also intends to allow local authorities to decide the premium that applies to second homes and long-term empty homes.

Income tax bands

The 20% basic rate and 21% intermediate rate bands will both go up by 7.4%. The remaining income tax bands will remain unchanged. The new rate bands will therefore be:

This gives rise to a very modest tax saving (up to £31.75 per year) for all those paying Scottish income tax compared to the bands applying in the 2025-26 tax year.

Any savings or dividend income continues to be taxed based on UK rates and bands.

The Scottish government suggests that this will result in over 55% of Scots paying less income tax because they live in Scotland. Conversely, the other 45% will be paying the same or more than those on the same income levels elsewhere in the UK.

Non-domestic rates

The Scottish government will retain reliefs for non-domestic rates such as the Small Business Bonus Scheme, while extending relief for retail, hospitality and leisure businesses located on the Islands and specified remote areas of Scotland. Small Business Transitional Relief will provide a transition for those losing their eligibility for Small Business Bonus Scheme relief. A 100% relief for EV charging points will apply for 10 years from 1 April 2026.

Land and Buildings Transaction Tax

There were no major announcements for Land and Buildings Transaction Tax (LBTT) rates. The First-Time Buyer Relief will continue to be available. Reliefs for certain investment funds will go ahead from 1 April 2026, while the government’s comprehensive review of LBTT continues. The tax take from LBTT is projected to rise to almost £1.2 billion by 2029-30.

Air Departure Tax

The Scottish government has been working on an Air Departure Tax since 2017. This will move ahead from April 2027, mirroring the rates in the UK, which will then diverge from 2028-29. Additional charges will apply to the use of private jets. There will be a relief for the Highlands and Islands, where air travel provides an important connection between communities.

Building Safety Levy

The previously announced Building Safety Levy will commence on 1 April 2028. The rates will not be published until June 2026.

Breakfast clubs for all primary and special school pupils

In a move to allow more flexible working, funding is being made to provide a breakfast club for every single Scottish primary and special school pupil by August 2027. This will allow children to be dropped off earlier, allowing more parents to start earlier.

Other taxes

The government also announced its intention to consider options for a Carbon Land Tax and to explore wealth taxation in Scotland, but has not provided any specific proposals.

You can read the full Scottish Budget here.

If you have any questions on these announcements, please get in touch with Elaine McInroy.