Scottish Budget 2025/26 – What are the Key Tax Takeaways

Compared to Labour’s Autumn statement, the Scottish Budget had relatively few tax policy announcements, focusing instead on their plans to spend revenue in this financial year. The key Scottish devolved tax changes set out by the SNP were as follows:

Income Tax

Firstly, it was confirmed that Tax rates will remain as they are across the six progressive Scottish tax bands. The  basic and intermediate tax bands will however, rise by 3.5% and it was confirmed that these two thresholds will continue to rise by at least the rate of inflation for the rest of this Parliament.  The proposed 2025/26 Tax bands and rates are set out below:

Those who have income (which is also subject to Scottish devolved taxes) of £30,300 or less, will therefore pay less tax than the rest of the UK. Conversely, anyone with income in excess of this amount will pay more.

Land & Buildings Transaction Tax (LBTT)

Scotland already has the highest tax rates in the UK for corporate buyers or those acquiring second homes. The SNP confirmed their intention to increase the associated additional charge for these transactions, ie the Additional Dwelling Supplement (ADS) rate still further, from 6% to 8% with effect from 5 December 2024. This compares to a 5% rate in England and Wales. Taking this increase alongside the already higher LBTT rates in Scotland, it means that acquiring any property in Scotland, not just second homes, will cost far more in tax charges when compared to UK counterparts.

The Government also confirmed there will be a range of different review and consultations connected to LBTT charges/potential reliefs for Co-Ownership Authorised Contractual Schemes (CoACS) and Property Authorised Investment Funds (PAIFs)

Alongside the above announcements, the Government published their ‘Scotlands Tax Strategy; Building on our Principles’ document‘. This sets out their medium-term plans to develop a tax system which will ‘support public service delivery, provide stability for taxpayers and foster an effective and efficient tax environment for business and the economy’.

Given the SNP is now a minority Government, the budget changes mentioned above, will need cross party support to be passed at Holyrood.

If you are a Scottish Tax payer,  you will appreciate the joint interaction of UK and Scottish tax bands and rates across all income sources, can sometimes be difficult to navigate. Our Private Client Team at AAB are perfectly placed to help. Please get in touch with Lynn Gracie, Jill Walker or your usual AAB contact