Scottish Budget 2026: How does it impact North East businesses?

On 13 January 2026, Finance Secretary Shona Robison delivered the Scottish Government Budget for 2026/27. With Holyrood elections approaching, the Budget balances social investment with continued pressure on public finances and supports Scotland’s increasingly distinct tax landscape.

The key changes

Income tax

There is some welcome movement at the lower end of the income scale. From April 2026:

• The Starter and Basic rate thresholds increase by 7.4%
• The Intermediate, Higher (42%), Advanced (45%) and Top (48%) rate thresholds remain frozen

Scotland continues to operate six income tax bands, compared with three in the rest of the UK. The practical result is that while lower earners benefit slightly, many higher earners will continue to pay more tax over time.

Why this matters:

• Owner-managed businesses, senior employees and professionals will feel this most
• Careful planning around salary, dividends, pensions and other income streams remains essential

New Council Tax Bands

Following England’s proposed “mansion tax”, Scotland will introduce two new council tax bands from April 2028:

• Band I: £1m – £2m
• Band J: £2m+

These bands will be based on updated property valuations, while all other homes remain within the existing system. The exact council tax multipliers are still to be confirmed.

Business rates relief introduced, but revaluation impact is key

There is good news on the surface for retail, hospitality and leisure businesses, with a 15% business rates relief introduced for eligible properties.

However, revaluations from 2026 mean many businesses will see higher rateable values and for some, those increases may offset the benefit of the new relief entirely.

What this means for you:

• Relief is helpful, but not guaranteed to reduce overall bills
• Transitional relief will help smooth increases, but cash-flow planning remains critical

We recommend reviewing rateable values early and considering whether an appeal is appropriate.

Other important measures to be aware of

While the above will affect the majority of our clients, several additional changes are worth noting.

Property taxes

There were no changes to Land and Buildings Transaction Tax (LBTT) rates or the Additional Dwelling Supplement (ADS), which remains at 8%.

However:

• LBTT relief will be introduced for certain co-authorised contractual schemes
• The long-awaited LBTT review (covering leases, ADS and mixed-use property) is expected before the end of the Parliamentary term
• Ongoing uncertainty remains around transitional leases

Air travel taxes and the “private jet” headline

From April 2027, Scotland will introduce Air Departure Tax (ADT), replacing UK Air Passenger Duty. Rates will initially mirror APD.

An additional Private Jet Supplement will follow from 2028/29.

New and devolved taxes

Several technical but important developments were announced:

• Scottish Aggregates Tax introduced from April 2026, replacing the UK levy
• Scottish Landfill Communities Fund closed to new contributions from April 2026
• Building Safety Levy to commence in April 2028

Support for families, schools and the workforce

The Budget places strong emphasis on social investment, including:

• Increased Scottish Child Payment, including higher payments for children under one
• Free breakfast clubs in all primary and special schools by August 2027
• A higher minimum pay rate for social care workers

At Hall Morrice, we can help you plan ahead, adapt early and make informed decisions. If you’d like to discuss how the Scottish Budget affects you, your family or your business, please speak to your usual Hall Morrice contact or email tax@hall-morrice.co.uk. 

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