Ahead of the Scottish Budget, Finance Secretary Shona Robison warned that she faced “tough” decisions to balance tax and spending plans. While expectations were set for difficult choices, the Budget has largely played it safe with £68 million pledged to create a “fair, healthy, safe, prosperous and green society”.
Our expert tax team has summarised four key takeaways from the announcements:
Income Tax
Thresholds for basic and intermediate rate will increase by 7.4%, meaning more than 55% of Scottish taxpayers will pay less income tax than they do in England and Wales.
Historically, the Scottish Government has pointed out that most taxpayers in Scotland pay less income tax than elsewhere in the UK – but in practice those savings have usually been modest, often just tens of pounds a year.
Meanwhile, those paying more under the Scottish system have faced significantly higher bills, often running into the thousands, affecting relatively mainstream professions such as teachers and police officers.
Today’s changes to the lower tax bands may rebalance this slightly, but our initial insight suggests that the gains may still be limited. What remains clear is the continuing and significant disparity for middle earners, many of whom still pay thousands more in Scotland than elsewhere in the UK, with little relief for the squeezed middle.
We’ve summarised the proposed changes to Scottish income tax payers in this table below:
| Band | Income range | Rate |
|---|---|---|
| Starter rate | £12,570 - £16,537 | 19% |
| Basic rate | £16,538 - £29,526 | 20% |
| Intermediate rate | £29,527 - £43,662 | 21% |
| Higher rate | £43,663 - £75,000 | 42% |
| Advanced rate | £75,001 - £125,140 | 45% |
| Top rate | Over £125,140 | 48% |
Property Taxes
The Finance Secretary confirmed that by 2028, two new council tax bands will be introduced for Scotland’s most expensive homes, valued at £1 million plus. This threshold is half of the so-called ‘mansion tax’ recently announced for England, which applies to properties valued from £2 million and is also scheduled for 2028.
As a result, owners of £1 million-plus properties in Scotland can expect higher bills in the future, with the impact likely to be felt most strongly in Edinburgh, where over half of all £1 million-plus property sales occurred in 2024/25.
While high-value homeowners face higher costs from 2028, landlords have, for the time being, been given some breathing room with no increase to the income tax rates applying to property income announced - a change many anticipated happening following the announcement in the UK Budget that income tax rates would increase by 2% across the bands for property income arising to English taxpayers from 6 April 2027.
We've compared how these new bands will differ between north and south of the border:
| England | Scotland | |
|---|---|---|
| Properties affected | Value £2 million + | Value £1 million + |
| Takes effect from | April 2028 | April 2028 |
| Amount of charge | £2,500 - £7,500 | To be confirmed, likely to vary by council area. |
| Bands | Four:
| Two:
|
| Valuation | 2026 valuations provided by the government's Valuation Office Agency, expected to be largely as a tabletop exercise with possibility to appeal. | “Up to date valuations” – unclear which body will carry this out. |
| Properties reviewed | Those currently in bands F, G and H (under 1991 values) | It is unclear how this will be established |
| % of properties affected | Less than 1%, a large proportion in London. | Less than 1%, a large proportion in Edinburgh. |
Business rates
Shona Robison announced that the Government will cut basic, intermediate, and higher property business rates, for retail, hospitality and leisure premises, along with a 15% non-domestic rates relief, in 2026/27 for each year of the three-year revaluation cycle - worth £138m.
Relief will be capped at £110,000 per business annually, with 100% rates relief for island businesses.
Energy and Infrastructure
In 2026-27, the Government will invest £93 million to advance offshore wind, £16 million to the "Just Transition Fund" for the North East and Moray (to support the region's move to a net zero economy), £16 million to help support the transition of Grangemouth's industrial cluster from traditional oil refining to new, sustainable activity, and £33 million for other energy transition projects. The Domestic Climate Change package will provide £22 million, including funding for Community Climate Action Hubs and the Scottish Climate Intelligence Service, while over £12 million will support climate justice initiatives for vulnerable communities in the Global South (countries that are generally less economically developed and are more vulnerable to the impacts of climate change), with a focus on women and young people.
Get in touch
We’ll be looking into the detail from the Scottish Budget further over the next few weeks, and sharing more content. For any further questions on the above content in the mean time, please get in touch with your usual Johnston Carmichael adviser, or contact us here.
