Finance Secretary Shona Robison said changes to the basic and intermediate rate income tax thresholds “will protect lower-income households in 2026-27” as she unveiled the Scottish Government’s Budget.
Robison also confirmed there would be no changes to rates or the number of tax bands in the coming financial year.
“In 2026-27, if the Budget is passed, the Basic and Intermediate rate thresholds will increase by 7.4% to £16,537 and £29,526 respectively,” said the Scottish Government.
“The Higher, Advanced and Top rate thresholds will remain at £43,662, £75,000 and £125,140 respectively.”
The Scottish Government said the 2026-27 Budget “will support a stronger NHS, with a record £22.5 billion for health and social care, expand cost of living support and invest in Scotland’s infrastructure.”
It said that published alongside the latest multi-year Scottish Spending Review, Infrastructure Strategy and Infrastructure Delivery Pipeline, the draft Budget “invests almost £68 billion including direct support for families and household budgets.”
The Scottish Government said the 2026-27 Budget includes:
- a cost of living package to: help families with funding to trial a programme of activities in a range of primary schools between 3-6pm; a Summer of Sport – free children’s sporting activities, including lessons on how to swim for every primary school child in the country; and a breakfast club for every primary school by August 2027
- continued investment in Scotland’s existing cost of living measures, including free prescriptions, free eye examinations, removal of peak rail fares on Scotrail, free tuition fees for young Scots, free school meals for thousands of children, including all pupils in P1 to P5, and free bus travel for under-22s and over-60s
- funding to increase Scottish Child Payment to £28.20 per week and investment to allow the introduction of a premium payment of £40 per week for eligible children under 12 months from 2027-28, bolstering efforts to drive down child poverty
- extra funding to keep more children out of poverty from funds initially set aside to mitigate the UK Government’s two-child cap, including £50 million of whole family support and a further £49 million for measures to be announced in the Child Poverty Delivery Plan in March
- tax choices which increase the Basic and Intermediate rate income tax thresholds to put more money in the pockets of low and middle income earners, maintain current income tax rates and bands, and provide a competitive non-domestic rates relief package worth an estimated £864 million, including measures for pubs, restaurants and retailers
- a record £22.5 billion for health and social care, including a record £17.6 billion for NHS boards and resources to begin the national rollout of walk-in GP clinics, making it easier to access same-day appointments
- an almost £15.7 billion record settlement for local government to support the services communities rely on including social care and education
- significant extra funding for universities and colleges, with colleges seeing a combined increase of £70 million in resource and capital funding, equivalent to a 10% uplift, targeted support to help retrain workers in the oil and gas sector and ongoing commitment to Scotland’s apprenticeships, which this year will provide more than 31,000 Scots with a pathway to sustainable, well-paid jobs
- over £5 billion to tackle the climate emergency, reduce carbon emissions and increase resilience as well as backing regenerative and sustainable skills in food and farming
- £4.3 billion transport funding including investment in railways, the renewal of the ferry fleet, removal of peak season fares for residents of Orkney and Shetland on Northern Isles ferries and nearly £200 million for the dualling of the A9
- record investment in new affordable homes
Robison said: “By raising the Basic and Intermediate rate thresholds by substantially more than inflation, this Budget once again provides tax support for low and middle-income earners.
“It also means that the clear majority of taxpayers in Scotland can expect to pay less income tax than in the rest of the UK.
“By delivering fair and progressive tax policies, we continue to deliver higher investment in the NHS and policies like free tuition not available anywhere else in the UK.”
Other measures in the Budget include:
- from April 2027, an Air Departure Tax (ADT) will come into force and the framework offered by the new ADT will be used to introduce a private jet supplement
- the introduction by April 2028 of two new council tax bands for the most expensive properties in Scotland, those worth more than £1 million, on an up-to-date valuation
- support for high-growth firms to attract private investment and connect entrepreneurs
- £200 million for the Scottish National Investment Bank – delivering on the commitment to invest £1 billion in the Bank by the end of the parliamentary term
- record funding for police and fire services and an additional £10 million investment in community justice services
- a £20 million increase in the culture budget, recognising Scotland is richer because of its world-famous culture and creative sector
- support for the creation of a diverse and sustainable supply chain for offshore wind, to boost the economy
REACTION:
Daniel Hough, Wealth Manager at RBC Brewin Dolphin: “Today’s Scottish Budget provided a welcome break for taxpayers with an increase in the basic and intermediate income tax bands.
“As a result, more individuals will potentially be paying less income tax from the next tax year. On the other hand, the freezing of the higher, advanced and top rate income tax bands remains in line with the UK.
“We also saw Scotland follow the UK’s example and introduce a ‘mansion tax’ with the announcement of two new council tax bands for high-value homes that will be paid on properties worth £1m upwards from 2028 – however, this is a change likely to affect only a small number of properties.
“Moving away from personal finances, the other big winner will be businesses with 96% of retail, hospitality and leisure businesses expected to pay no or reduced business rates in the next tax year, further supporting the local economy.
“On the whole, this was a crowd pleaser budget with support packages for the average working person with measures for families, young people, businesses, healthcare and the environment.”
Scottish Financial Enterprise CEO Sandy Begbie: “This budget was an opportunity for the Scottish government to prioritise growth by boosting capital investment and easing the burden on taxpayers and businesses, but it largely highlighted the continued lack of focus on accelerating growth in Scotland.
“The steps taken on tax thresholds are very modest, and we are disappointed that by not also moving the higher rate threshold, more people will be dragged into paying tax at 42%. Similarly, mention of public sector reform is positive, but is only a start and it remains to be seen whether even that is achievable.
“As polling showed this week, the majority of the public simply don’t believe they are getting value for money from the taxes they pay.
“Ministers say much about long-overdue capital investment in infrastructure but it is not realistic for the Scottish government to fund all the investment that is necessary to enable Scotland to catch up with comparable countries around the world. The Scottish government should collaborate closely with the private sector on different investment models so we can accelerate the investment this country badly requires.
“As we approach the election in May, politicians need to understand that growth is driven by workers and businesses, rather than simply more government spending.”
Susan Love, Strategic Engagement Lead for Scotland, ACCA: “With 2026 being an election year for Scotland, this Budget was always going to be an important inflection point for Scotland’s economic policy.
“The announcement today addressed issues critical to business success such as business taxes, transport, skills and business support. We welcome measures to address business concerns about rises in non-domestic rates and the college funding crisis. But, overall,
“While the Scottish Government stayed true to its commitment to avoid further increases in Income Tax and no new tax bands for the remainder of the Parliament, we’re disappointed in the continued fiscal drag, with the thresholds for the upper three bands remaining frozen for another year, drawing yet more taxpayers into these bands. With further announcements on changes to Council Tax, and a new air departure tax, our tax landscape remains overly-
“The rise in Employers’ National Insurance Contributions has undoubtedly increased employment costs for many firms, compounded by rises in the National Living Wage. It was crucial for the Cabinet Secretary to avoid further cost increases for Scottish firms and to consider where costs can be alleviated, for example by maintaining current rate reliefs for small businesses and considering where further support can be extended.
“Today’s announcement to continue the Small Business Bonus Scheme for another three years provides helpful certainty for small firms, while the modest relief for retail and hospitality firms is also welcome. However, for some businesses, the impact of reduced poundage rates, while welcome, may be offset by increases in rateable
Alan Stewart, Partner, MHA, the accountancy and business advisory firm: “This was certainly a Budget with one eye on May’s Scottish elections designed to help secure poll lead and head off attack lines from opposition parties. Many will see it as a step in the right direction for the NHS, families and business, with reductions in rates likely to be welcomed by the retail, leisure and hospitality sectors.
“Taxpayers paying tax at the lower tax rates will also benefit from the announced changes and there was also reference to support for oil and gas workers transitioning into renewables, although further detail will be needed.
“Additional funding flexibility from the UK Government, alongside £126 million previously allocated to mitigate the impact of the UK-wide two-child benefit limit and headroom arising from the Barnett formula, created the scope for the Scottish Government to direct further funding towards its priority areas.
“There was no major tax changes announced apart from the introduction of a mansion tax and private jet departure taxes, which will now lead to some interesting debates on the spending decisions made by the Scottish Government and how opposition parties would have used and prioritised the available funding.”
Donna Brennan, partner and private wealth lawyer at Weightmans: “It was always wishful thinking that this Budget might address the fact that Scots face a double burden – a UK inheritance tax regime that doesn’t account for our separate legal system, and a devolved tax landscape that increasingly places higher costs on individuals, families and businesses. Sadly, the complication of an array of different rates and bands compared to our neighbours in the rest of the UK remains and will continue to be a political football.
“Changes confirmed by the UK Government, including a cap on Agricultural and Business Property Relief from April 2026, will affect many Scottish estates, particularly in rural areas. While the threshold has now been revised upwards to £2.5 million, the loss of full relief on larger holdings is a material shift. Alongside the introduction of higher council tax bands from April 2028 on properties valued at over £1 million (being dubbed a ‘mansion tax’), this reinforces the direction of travel for wealth and property taxation in Scotland and adds further pressure to intergenerational planning.
“What makes this even more acute in Scotland is the structure of our succession law. Legal rights, the classification of property, and the distinction between moveable and heritable assets all need to be considered alongside tax exposure, something that simply doesn’t apply in the same way elsewhere in the UK.
“While increases to the basic and intermediate income tax thresholds will see many lower-income earners pay less than elsewhere in the UK, higher earners continue to face a more punitive tax environment. Despite targeted reliefs, many property owners and business clients are likely to see their overall tax burden continue to rise.”
Sara Thiam, chief executive, Prosper: “With the economy slowing and unemployment rising, it was more important than ever that this was a budget for growth and opportunity. We at Prosper made this clear when we published our economic Blueprint last summer.
“Ending the severe cuts to college funding – where budgets have reduced by 20 per cent since 2021/22 – is a belated recognition of the critical role that further education plays in providing opportunities to workers throughout life and increasing the skills of the labour force.
“Scotland has a once-in-a-generation economic opportunity from the transition to clean power. We welcome the investment in offshore wind and in the supply chain, help for oil and gas workers to develop their skills in the renewables sector and the support announced for communities most acutely affected by the transition in the north-east, Grangemouth and around Mossmorran in Fife.
“Prior to the budget, many Scottish businesses faced potentially devasting increases in non-domestic rates following the 2026 revaluation. It was right that the finance secretary took action to address this by introducing transitional relief.
“However, given the scale of the increases, which were approaching 400 per cent in some cases, the proposed measures will not go far enough and simply kick the can down the road, storing up potentially bigger problems in the coming years. The cap on reliefs also means that Scottish retail and hospitality businesses will be at a competitive disadvantage compared to England.
“Investment provides a route to grow the economy sustainability over the long-term. It was encouraging to see the publication of the government’s draft infrastructure strategy and delivery pipeline alongside the budget. The investment in affordable housing is positive but does not quite reinstate the real terms settlement.
“Last year we asked for multi-year spending plans and their introduction is a step in the right direction but as a pre-election budget the measures announced today are only indicative. That makes delivery after May even more important. For example, the planned £1.5bn savings from public sector efficiencies will need to be matched with concrete actions. We had also hoped to have heard more about how a place-based approach to delivery, including by empowering our regions, can drive growth across Scotland.
“An election is upon us and many of the measures announced by finance secretary Shona Robison – including tweaks to two of the income tax bands – reflect that. But whatever the result in May, all parties in Scotland must not lose sight of the urgent need to start growing our economy.”