Scottish Budget 2025/26 - Top Tax Takeaways

This Budget has been delivered by the SNP as a minority Government. The SNP are two seats short of an overall majority at Holyrood, so the Budget will require cross-party support to be passed.

As usual, the Scottish Budget has been introduced after the UK Autumn Budget, which took place on 30 October of this year.

Here are our top tax takeaways from the Scottish Government Budget 2025/26 delivered today by Shona Robison:

1. Income tax is by far the largest part of the amount that can be raised by devolved taxes. Following the widely anticipated creation of a new 45% rate in last year’s Budget – dubbed the “Advanced” rate and applying to incomes between £75,000 and £125,140 – this year’s Budget brought confirmation that there would be no increase in the number of tax bands (currently six) or the rates of tax on these bands, not only for 2025-26, but also for the remainder of this Parliament (effectively one further tax year).

2. There will, for 2025-26, be a 3.5% increase in basic and intermediate rate thresholds to £15,397 and £27,491 respectively; and it was confirmed that these two thresholds will rise by at least the rate of inflation for the rest of this Parliament. The remaining thresholds will be maintained at their current levels. As a consequence of these increases, a Scottish taxpayer pays less tax than the rest of the UK if their earnings, rental and trust income are £30,317 or less. The complete table of rates and thresholds for 2025-26 is as follows (assuming a personal allowance (set by the UK Parliament) of £12,570).

3. The Additional Dwellings Supplement (or ADS) - the extra Land and Buildings Transaction Tax (LBTT) payable on certain residential property purchases - is to increase again from 6% to 8%. The increase takes effect from 5 December 2024, unless missives for a purchase were concluded before that date. This means that the highest marginal rate of LBTT is now 20%. The total LBTT on the purchase of a buy-to-let property for  £200,000 is now £17,100, of which £16,000 is the ADS. While the ADS is often touted as a “second homes tax”, it is in fact highly complex and can give rise to unexpected costs for purchasers.

4. A consultation will be published in 2025 on an LBTT relief for the exchange of units in Co-ownership Authorised Contractual Schemes (CoACS) investing in Scottish property. Further consideration will also be given to an LBTT relief for the "seeding" (initial contribution) of properties into Property Authorised Investment Funds (PAIFs) and CoACS. This will allow Scottish properties to be included in significant investment funds which are currently being set up.

5. Unlike England, Wales and Northern Ireland, Scotland has (for the time being) retained LBTT multiple dwellings relief on purchases or two or more dwellings. However, the budget fine print also contains an announcement that the Scottish Government will review certain aspects of residential and non-residential LBTT. A similar consultation was carried out in respect of Stamp Duty Land Tax (SDLT) between 2021 and 2024, which resulted in SDLT Multiple Dwellings Relief being cancelled.

6. The non-domestic rates Basic Property Rate will be frozen at 49.8%. A 40% relief will be introduced for properties in the hospitality sector (including grassroots music venues) and a 100% relief for hospitality businesses in the Highlands and Islands.

7. From 1 April 2025, the standard and lower rate of Scottish Landfill Tax will both increase to £126.15 per tonne and £4.05 per tonne. In 2025-26, landfill operators will still be able to contribute up to 5.6% of their tax liability to the Scottish Landfill Communities Fund.

8. The Scotland Act 2016 provides for a proportion of VAT receipts raised in Scotland to be assigned to the Scottish Government. The UK and Scottish Governments continue to work towards agreeing the technical basis of such an arrangement.

9. The Scottish Aggregates Tax will replace the UK Aggregates Levy on the exploitation of aggregates in Scotland from 1 April 2026. The Aggregates Tax and Devolved Taxes Administration (Scotland) Act received Royal Assent in 2024. The Scottish Government intends to introduce legislation in 2025-26 to establish a Building Safety Levy in Scotland and work is also ongoing on the introduction of a Cruise Ship Levy. The Scottish Government is committed to considering options for a Carbon Land Tax.

10. The Scottish Government today published Scotland's Tax Strategy which sets out its approach to developing tax policy, with a view to ensuring the tax system raises the revenue needed to achieve government priorities and support Scotland's economy. As well as seeking to grow Scotland's tax base and strengthening compliance, the government sets out its future priorities, which include exploring the balance of taxes across income, labour and wealth. There is a lot in this document, which necessarily covers many possibilities, but understandably details are limited.