Scottish Budget outlines targeted support for business, investment and public services ahead of election
· Posted on: January 13th 2026 · read
This Budget was clearly shaped with an awareness of the political landscape ahead of May’s Scottish elections, placing emphasis on visible support for the NHS, families and businesses while seeking to limit obvious lines of attack from opposition parties.
For many, it will be viewed as a broadly constructive step, with business rates relief in particular offering reassurance to the retail, leisure and hospitality sectors.
So how was all this possible?
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, has provided scope for the Scottish Government to direct further resources towards its stated priorities.
This has enabled a package focused on targeted investment in public services, household support and economic resilience, rather than major structural reform.
From a business perspective, the Government said it placed a clear emphasis on economic stability, investment and continuity in a constrained operating environment.
Changes to the tax system are limited, and the 7.4 per cent increase to the basic and intermediate income tax thresholds is notable largely for what it avoids. By easing fiscal drag, the measure supports employee retention and disposable income without introducing additional complexity for employers, while the wider progressive structure remains unchanged, providing predictability for workforce planning.
"There were no other 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."
Business rates support will be welcomed by many. The Small Business Bonus Scheme will continue for a further three years, offering ongoing relief to the smallest firms. In retail and leisure, the government said, that 96% of businesses will continue to pay zero or reduced rates.
The absence of any changes to LBTT provides welcome certainty for the commercial property market.
Targeted funding has been set aside to retrain oil and gas workers, albeit further detail is required, expand apprenticeship pathways and support workforce redeployment into adjacent and emerging industries.
"Investment linked to major industrial assets, including sites such as Mossmorran, underlines the importance of maintaining strategic infrastructure."
"Wider investment commitments remain significant. The Budget confirms £1 billion of capital investment in the Scottish National Investment Bank by the end of this parliament, keeping it on track to invest £2 billion over its first ten years and continue supporting start-ups and high-growth businesses."
Alongside this, £5 billion has been allocated to climate-related investment, with implications for supply chains, skills development and private sector participation.
Also, measures aimed at supporting working families featured strongly, including a trial of after-school activities between 3pm and 6pm, free sports and swimming lessons for children over the summer, and a commitment to provide breakfast clubs in every primary and special school by August 2027.
While the overall direction of travel sounds broadly positive for business, further clarity on funding mechanisms, delivery timelines and long-term sustainability will be essential to maintain confidence and support long-term investment decisions.
