Our Personal Tax team have summarised key points to consider from the draft Scottish Budget announcement that took place on 13 January 2026.

Income tax

Key takeaways: From the 2026/27 tax year, there will be an income tax cut – but not one to get excited about, with a maximum saving of £32 per annum. From 2027/28, the Scottish Government (SG) will follow the UK Government and apply a 2% surcharge on property income.  

Comments:

• From 6 April 2026, the SG proposes to increase the Basic and Intermediate rate thresholds by 7.4 per cent. This is a maximum saving of £32 per year.
• The SG will maintain the Higher, Advanced and Top rate thresholds at their current levels until 2028-29.
• The UK Budget increased the rate of Income Tax charged on property income in the rest of the UK by 2p from 2027-28 i.e. 22% / 42% / 47%.
• The UK Government has committed to devolve an equivalent power, to set a separate rate for property income in Scotland, as part of the UK’s annual Finance Act.
• Subject to legislative consent from the Scottish Parliament, the first year this power could come into effect would be 5 April 2027.

Table 1: Proposed income tax rates and bands

*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.

Land and buildings transaction tax (LBTT)

Key takeaways: No changes. Key reliefs – multiple dwellings relief and the purchase of 6 or more residential properties in a single transaction – continue to be treated as a non-residential transaction so a max LBTT rate of 5% (rather than 12%) and no additional dwelling supplement (ADS) applies.

Comments:

• The SG will maintain the residential rates and bands at their current level for LBTT. The ADS will remain at 8 per cent.
• The first-time buyer relief will continue to be available. This has the effect of increasing the residential nil rate band from £145,000 to £175,000 for first-time buyers.
• Maintain current non-residential LBTT rates and bands.
• Multiple dwellings relief survives for another day.

LBTT future changes

• A comprehensive review of LBTT is underway to examine various aspects of the residential and non-residential arrangements for the tax. This is reviewing several key policy areas, including first-time buyer relief and the treatment of mixed-use transactions.
• Alongside this, the SG are progressing an internal review focusing on non-residential leases, measures to support investment in Scotland, and the impact of the ADS where exceptional circumstances or events occur.
• The findings on the above are to be published before the end of this Parliamentary session.

Council tax

Key takeaways: Additional council tax rises for homes valued at over £1m with effect from 1 April 2028. There may also be an increase in council tax for empty homes or second homes as the current caps which apply (200% and 100% respectively) could be scrapped and enable local councils to set the thresholds without a cap.

Comments:

The SG will introduce new high value council tax bands for the most expensive residential properties from 1 April 2028. Two new bands will be created above the current highest band:

• Band I for properties valued between £1 million and £2 million; and
• Band J for properties valued above £2 million.

These bands will be based on up-to-date values for those properties only, with all other homes remaining on the existing council tax valuation framework (i.e. values as at 1991).

The impact of those may be limited: the BBC reports that the Registers of Scotland said there were 391 properties sold for more than £1m in 2024-25 – and more than half of them were in Edinburgh.

New taxes: potential reviews

Building safety levy (BSL)

• As previously announced, the Levy will commence on 1 April 2028. To provide industry with advance certainty, the SG intends to publish Levy rates in June 2026, 22 months in advance of the commencement of the Levy.
• To learn more, we wrote an article (click here) which goes into more detail on BSL, who it impacts and how it is calculated.

Carbon land tax

• The SG is reviewing the introduction of a carbon land tax, as part of exploring regulatory and fiscal changes that could be made to further support land reform and reduce greenhouse gas emissions from land.
• The SG is working with the Scottish Land Commission (SLC) to consult with a range of stakeholders and to develop the evidence necessary to identify and assess options for future taxation in this area.
• The SLC has published an interim report setting out the progress of work so far and next steps.

Wealth tax

• The SG has also committed to examining the balance of taxes across labour, income, and wealth in the context of our devolved powers.
• The SG are examining the international debate on balancing labour taxation with other forms of income and wealth, including land and property taxation, to develop tax systems that are more resilient and provide a broader set of fiscal tools to respond to economic shocks and future fiscal challenges.
• To support this discussion, the SG will explore what wealth taxation could look like for Scotland, understanding the opportunities and challenges that this may offer our tax system, and the steps that would be needed to progress options.