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Examining the key announcements in the Scottish Budget 2026/27
The Scottish Budget 2026/27 was unveiled by the Scottish Government on 13 January and is expected to be agreed, without any major changes, by the Scottish Parliament in late February.
With the Scottish elections in May, the focus of this Budget was firmly on addressing the cost of living crisis and supporting families, with announcements to improve childcare and NHS services. While business concerns had clearly been noted, for example in relation to worries about the impact of new rateable values on business rates bills, the support announced was limited.
Positively, the Small Business Bonus Scheme will remain for the next three years (subject to the result of the elections) and 15% rates relief will be offered for all retail, hospitality and leisure businesses in basic and intermediate rates (up to £100k rateable value).
However, the announcement to reduce poundage rates may offer limited benefit in practice, as many business properties will see increased rateable values from April, arising from the revaluation process. As is usually the case, a transitional relief scheme will be in place to taper increases arising from revaluation. Separately, the Cabinet Secretary committed to reviewing support for pubs in light of any changes that may be announced for England.
There was limited change to taxes overall. As anticipated, following a recent consultation on changes to council tax, from April 2028 two new bands will be introduced for high value properties valued over £1m. There are no changes to rates of Land and Buildings Transactions Tax (LBTT). The Scottish government will also introduce the long-planned Air Departure Tax from April 2027. While this will initially match the UK rate, the Scottish government intends to add a supplement for private jet flights from 2028.
On income tax, the government stuck to its commitment that there would be no new bands or increases for the remainder of the parliamentary session (May 2026). The thresholds for basic and intermediate bands will both be uprated by 7.4%, but the thresholds for other bands remain frozen for another year.
Find more technical detail on income tax changes
Table 1: Proposed income tax rates and bands
| 2025/26 | 2026/27 | |||
| Band | Rate | Band | Rate | |
| Starter | £12,571*-£15,397 | 19% | £12,571*-£16,537 | 19% |
| Basic | £15,398-£27,491 | 20% | £16,538-£29,526 | 20% |
| Intermediate | £27,492-£43,662 | 21% | £29,527-£43,662 | 21% |
| Higher | £43,663-75,000 | 42% | £43,663-£75,000 | 42% |
| Advanced | £75,001-£125,140** | 45% | £75,001-£125,140** | 45% |
| Top | Over £125,140 | 48% | Over £125,140 | 48% |
*Assumes individuals are in receipt of the standard Personal Allowance.
**Those earning more than £100,000 will see their Personal Allowance reduced by £1 for every £2 earned over £100,000.