The Scottish Budget for 2026/27, which determines the income tax rates and bands that apply to Scottish taxpayers’ relevant income as well as setting fully devolved taxes, was delivered at Holyrood on 13 January 2026.
This article summarises key issues for Scottish taxpayers, as well as for other individuals with interests in Scotland. Please see our companion article for measures for businesses and employers.
In summary, a ‘Scottish taxpayer’ is a UK resident individual who, in the relevant tax year, has a ‘close connection’ with Scotland due to the location of their main place of residence. UK resident individuals who cannot establish a ‘close connection’ with either England, Northern Ireland, Scotland or Wales based on their main residence will be ‘Scottish taxpayers’ if they spend more days in Scotland than in any other individual part of the UK.
Scottish taxpayers are subject to income tax on non-savings and non-dividend income (e.g. rental, pension or employment income) based on rates and bands set by the Scottish Parliament. However, all other aspects of the income tax system, as well as National Insurance Contributions (NIC), remain reserved to the UK Parliament. This means that Scottish taxpayers are entitled to an income tax free Personal Allowance, and are subject to tax on savings income (i.e. interest) and dividends, on the same basis as other individual UK taxpayers.
From 6 April 2026, the rates and bands that apply to relevant income of Scottish taxpayers will be as follows:
In line with the Tax Strategy published at the last Scottish Budget, no changes to any of the Scottish rates of income tax and no new income tax bands were announced (there had been some pre-Budget speculation that steps might be taken to address the 50 percent effective rate of income tax and employee’s NIC on Scottish taxpayers’ earnings between £43,663 and £50,270 but no such measures were announced).
However, the Basic rate threshold will increase from £15,398 to £16,538 (increasing the band of income charged at the lower Starter rate), and the Intermediate rate threshold will increase from £27,492 to £29,527 (increasing the band of income charged at the lower Basic rate), which represent above inflationary increases based on the Scottish Government’s chosen measure and a marginal income tax reduction in nominal terms.
The Higher rate, Advanced rate and Top rate thresholds will remain frozen.
At the UK Budget in November 2025, the Chancellor announced that the Scottish Parliament will be given the power to set separate rates of income tax on Scottish taxpayers’ property income. Measures to devolve this power are included in the current Finance Bill but will not come into effect before 6 April 2027 at the earliest.
LBTT applies to chargeable residential property transactions in Scotland. There will be no changes to the residential LBTT rates and bands from 1 April 2026.
First-Time Buyer Relief (FTBR), which in effect extends the nil rate band for residential properties from £145,000 to £175,000, will be maintained and the Additional Dwelling Supplement (ADS) will remain at 8 percent.
The results of a comprehensive review of the LBTT regime, which includes examining FTBR and the impact of ADS in exceptional circumstances, are expected before the end of the current Parliamentary term. This review aims to inform LBTT policy making in the next Parliament.
Following the announcement at the last UK Budget of a new High Value Council Tax Surcharge on residential property owners in England, two new council tax bands will be introduced in Scotland from 1 April 2028:
Whilst the new Bands I and J will be based on up-to-date valuations, all other homes will remain within the existing Council Tax valuation framework.
The Scottish Government has also said that, together with local government, it will consider appropriate safeguards and mitigations (e.g. deferral arrangements and potentially expanding or adapting the Council Tax Reduction scheme) to ensure that the policy is fair, proportionate and deliverable. Further, the Scottish Government intends to remove the existing legislative cap on Council Tax premiums, paving the way for local authorities to determine the premium that applies to second or long-term empty homes from 1 April 2026.
As Scotland moves toward implementing Air Departure Tax (ADT) as a devolved replacement to Air Passenger Duty, plans were announced to introduce a Private Jet Supplement (PJS) from 2028/29. Further details of the proposed PJS are expected in due course.
The current Scottish Government also proposes to seek the devolution of further powers from the UK Parliament to address private jet ‘ghost flights’ (i.e. flights at significantly under their passenger capacity).
The Scottish Government also stated in its Budget publications that it remains “committed to examining the balance of taxes across labour, income and wealth in the context of our devolved powers”. In particular, the current Scottish Government plans to consider what form wealth taxation might take in a devolved Scottish context, the opportunities and challenges that it could present, and what steps might be needed to move forward with any potential new policies (including, presumably, requesting the devolution of further powers from the UK Parliament required to implement any changes) if re-elected in May.
The Budget will now begin its progress through the Scottish Parliament but, whilst the Scottish National Party governs as a minority administration, is likely to pass in its current form. We have extensive experience assisting individuals to assess their Scottish taxpayer status and manage other aspects of devolved taxation in Scotland. Please contact the authors, or your usual KPMG in the UK contact, if you would like to discuss the potential impact of the Scottish Budget announcements on your personal tax position.
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