This week’s Scottish Budget, the last before May’s Holyrood elections, didn’t carry many show-stopping announcements.
Finance Secretary Shona Robison sought to cover a number of bases, delivering to varying degrees on the priorities and expectations of key stakeholder groups. The question is whether this broad-based approach goes far enough to deliver meaningful outcomes.
Her decision to raise the thresholds on the basic and intermediate rates of income tax by 7.4% will result in modest wage-packet gains for some workers – and positions the Scottish Government to claim more people north of the border can expect to pay less tax than if they live elsewhere in the UK. Taxpayers drawn into the higher rates will continue to pay more tax than those on comparable incomes elsewhere in the UK.
Meanwhile, perhaps the big news for the business community came in the form of a reduction in the basic, intermediate and higher property rates, while transitional relief worth over £180m will be provided over the next three years.
There will also be 15% non-domestic rates relief in 2026/27, and in each of the three years of the revaluation cycle, benefiting retail, hospitality and leisure premises to the tune of £138million.
The small business bonus scheme will also continue for three years. Overall, according to the Finance Secretary, over 96% of retail, hospitality and leisure businesses will pay zero or reduced rates. However, industry leaders - particularly within the hospitality sector - are already saying that more needs to be done to support the industry.
The rates-related measures are likely to be viewed as eye-catching and a step in the right direction. However, pressure may continue - particularly from larger high-street retailers and businesses - given the more favourable rates environment in England and Wales.
Many businesses will now be turning to their professional advisers for insights on these announcements and how best they can benefit from them.
Adrian Johnston, Tax Manager at MHA
Elsewhere, the introduction of two new council tax bands for properties valued at over £1million sends a message to supporters that the Government is carrying through on its pledge that those with the broadest shoulders will carry a little more of the financial burden.
The Finance Secretary referenced targeted support to address skills shortages in the offshore renewables sector, and to help retrain oil and gas workers. In 2026–27, £93 million will be invested in offshore wind to support manufacturing and infrastructure, with the aim of attracting private investment and sustaining jobs. A further £16 million will be allocated through the Just Transition Fund to support businesses, workers and communities in the North East and Moray, alongside £16 million to help secure the future of the Grangemouth industrial cluster. An additional £33 million will be directed towards energy transition initiatives to support a secure, efficient and sustainable energy supply.
With the Budget still subject to formal parliamentary approval, scrutiny of spending decisions will continue across the political and economic landscape, with particular focus on whether the breadth of these commitments is matched by sufficient depth of investment. In the run-up to the May election, opposition parties will also use this period to highlight areas of political differentiation.
Finally, it is perhaps worth highlighting here that while many local businesses will now be assessing the impact of this week’s Scottish Budget, they will also still be digesting the terms of a significant announcement made by the UK Government just before Christmas.
Inheritance tax thresholds have had a high political profile in recent years and remain a key issue for many businesses and farming interests.
While not widely highlighted at the time, on December 23 the UK Government revealed it was increasing the proposed inheritance tax allowance for agricultural and business property from £1million to £2.5million from April 2026.
"We are already engaging with clients to advise them on the implications of this highly welcome move."
