Scottish Budget 2026/27 - Top Tax Takeaways

Here are our top tax takeaways from the Scottish Government Budget 2026/27 delivered today (13 January 2026) by Finance Secretary Shona Robison:

1. Income tax thresholds. There are six income tax rate bands for Scottish taxpayers, affecting their earned and property income only, as compared to three such bands in the rest of the UK. The thresholds at which two of those rate bands (Basic and Intermediate) commence have been substantially increased, by 7.4%. This means that Scottish taxpayers will, after the UK-set personal allowance of £12,570, pay the Starter rate of 19% until affected income reaches £16,537; and Basic rate of 20% until affected income reaches £29,526, at which point the Intermediate rate of 21% commences. The thresholds for the three rates higher than this (Higher at 42% from £43,663, Advanced at 45% from £75,001 and Top at 48% from £125,140) have been frozen. This compares with a freezing of all UK income tax thresholds until April 2031, announced in the UK Budget in November 2025. The break-even point at which Scottish taxpayers pay more tax is £33,493.
2. Property income tax. It was also announced in the UK Budget that there would be an increase in all rates of tax on property income of 2%, from 2027/28. From that date, a change in the devolved power over income tax will be implemented, allowing the Scottish Parliament to fix a separate rate for property income if it chooses to do so. Until that power takes effect, the Scottish rates (and thresholds) for income tax must be applied to all types of affected income. A cornucopia of varying rates of income tax will continue to apply to those Scottish taxpayers with varying sources of income.
3. Council Tax on high value properties. New Council Tax bands are to be introduced for ‘high value’ residential properties with effect from 1 April 2028. The two new bands: Band I, for properties valued between £1 million and £2 million; and Band J, for properties valued above £2 million will be applied using up-to-date property values, while all other homes will remain on the existing Council Tax valuation framework. Council Tax charges are set by individual Councils determining the rate for Band D properties, and a multiplier set by the Scottish Government determining the remaining Bands by reference to the Band D charge. The Scottish Government has not yet confirmed what the multiplier will be for properties falling within either of the new bands. This measure follows last year’s announcement by the UK Government of the High Value Council Tax Surcharge to be introduced in England, also from April 2028.
4. Non-Domestic (Business Rates). From 2026/27 and for the remainder of the revaluation period, a 15% relief will be introduced for properties in the retail, hospitality, and leisure sectors liable for the Basic or Intermediate Property Rate, capped at £110,000 per business per year. In addition, in view of the increases in valuations in the 2026 Revaluation:
   1. the Basic Property Rate (‘poundage’) on properties with a rateable value up to £51,000 is reduced to 48.1p, the Intermediate Property Rate for properties with a rateable value between £51,001 and £100,000 is reduced to 53.5p and the Higher Property Rate on properties with a rateable value above £100,000 is reduced to 54.8p
   2. Revaluation Transitional Relief will be introduced, capping increases in gross bills up to the next revaluation in 2029
5. Scottish Landfill Tax. The rates of Scottish Landfill Tax for 2026/27 will be set at the rate of £130.75 per tonne (standard) and £8.65 per tonne (lower). One of the main policy aims of this tax is of course to reduce amounts of landfill and thus the tax chargeable on it; and the success of this aim is marked by substantially declining overall receipts from SLfT. One of its features is the ability of taxpayers to contribute a (capped) amount to the Scottish Landfill Communities Fund in return for a 90% tax credit. But declining tax revenues means that the Fund is no longer sustainable and after consultation the decision has been made to close the fund to new contributions from 1 April 2026. Funding for existing and some new projects will continue until March 2028.
6. Scottish Aggregates Tax: A new Scottish Aggregates Tax, the third fully devolved tax in Scotland, will be introduced from 1 April 2026. This will replace the UK Aggregates Levy (paid on commercial exploitation of aggregates: essentially crushed rock, sand and gravel). The rate in the first year will align with the UK Aggregates Levy. Future rates will be a decision for a future administration in the next session of the Scottish Parliament.
7. Air Departure Tax: Air Departure Tax (ADT) will apply to the carriage of passengers by air from Scottish airports from 01 April 2027. The UK-wide Air Passenger Duty (APD) will cease to apply from this date; however, the rates and bands of ADT will be matched with APD for the 2027/28 tax year. In what might be one of the most laser-focused, targeted tax measures announced, an additional charge, Private Jet Supplement, will be introduced from 2028/29, increasing the rate of tax that will apply to travel on private jets. A consultation will also be launched in January 2026 on the introduction of an exemption from ADT applying to passengers on flights leaving Highlands and Islands airports (which are currently exempt from APD).
8. Building Safety Levy: The Building Safety Levy, equivalent to the levy being introduced in England by the UK Government to support cladding remediation, will commence on 1 April 2028 with Levy rates being published in June 2026.
9. No changes at all to LBTT “in this budget”: Breaking from the tradition of prior years there is no increase to the additional dwelling surplus (ADS) which, readers are reminded, currently sits at a flat rate of 8%. However, this does not mean that there are no changes to LBTT to be aware of:
   1. Relief will be introduced for the transfer of units in Co-Authorised Contractual Schemes (COACs) from 1 April 2026.
   2. Reserve Investor Funds (RIFs – a new form of contractual scheme with an SDLT relief attached) still do not have an LBTT relief, despite last year’s consultation. Likewise, there was no seeding relief for Property Authorised Investor Funds (PAIFs), COACs and RIFs. More work is required to address various issues about the interaction between LBTT and SDLT in this space.
   3. The output of the “Big LBTT review” – covering leases, ADS issues, mixed use property, multiple dwellings and a variety of other points will be announced before the end of this Parliamentary term. However, we do not expect to see any legislation this side of the election, so it remains to be seen how the next government will take these outputs forward.
   4. Nothing on Archer – perhaps a forlorn hope, but this means the status of transitional leases is still up in the air following Revenue Scotland’s appeal against last year’s tribunal decision. The uncertainty around how such leases are taxed, for now, continues.
10. Assignment of VAT receipts: The Scotland Act 2016 allows for the first 10p of standard rate VAT receipts and the first 2.5p of reduced rate VAT receipts to be assigned to the Scottish Government. It was confirmed that, due to the uncertainties and complexities in the methodology of VAT assignment and its impact on the Scottish Budget, the Scottish Government will continue to discuss the issue with the UK Government.

Contact one of our tax experts below, or your usual Brodies contact for more information on how these new developments may impact you or your business.