On December 4th, Finance Secretary Shona Robison presented the Scottish Government's Budget for 2025/26, outlining several key measures aimed at supporting businesses, individuals, and rural communities. While the announcements weren’t as sweeping as the UK Government’s recent Budget, there are still significant updates for Scottish taxpayers and business owners to note.
Here’s a breakdown of the key changes.
For Business Owners
Business Rates Relief
One of the standout measures is the 40% business rates relief for hospitality businesses paying the Basic Property Rate. This applies to businesses with a rateable value of up to £51,000, capped at £110,000 per business. Additionally, the Basic Property Rate will remain frozen at 49.8p for every £1 of rateable value, providing stability for small businesses.
Rate Bands for 2025/26:
- Basic Property Rate: 49.8p (rateable value up to £51,000)
- Intermediate Rate: 55.4p (rateable value £51,001–£100,000)
- Higher Rate: 56.8p (rateable value above £100,000)
Rural Communities
More than £660 million has been allocated to support rural areas, including farmers, crofters, and the wider rural economy. This funding is vital for Scotland's agricultural resilience and sustainability.
Businesses located on islands and in specific remote areas (Cape Wrath, Knoydart, and Scoraig) will continue to benefit from 100% rates relief, a recognition of the unique challenges faced by these communities.
End of COVID-Era Relief
The Retail, Hospitality, and Leisure relief, introduced during the pandemic, will close for applications on March 31, 2025. Businesses that have relied on this support should plan for the transition.
For Landlords and Property Buyers
The Land and Buildings Transaction Tax (LBTT) rates for 2025/26 remain largely unchanged, but the Additional Dwelling Supplement (ADS) will increase to 8% for transactions effective from December 5, 2024. Here’s a quick snapshot of LBTT rates:
Residential Property Purchases:
-
0% on properties up to £145,000
-
2% for £145,001–£250,000
-
5% for £250,001–£325,000
-
10% for £325,001–£750,000
-
12% for above £750,000
First-time buyers benefit from an increased nil-rate band of £175,000.
Non-Residential Purchases:
-
0% up to £150,000
-
1% for £150,001–£250,000
-
5% for above £250,000
For Working People
Income Tax Changes
Income tax thresholds in Scotland will increase modestly, while rates remain frozen. This means:
-
The starter rate threshold will rise to £15,397.
-
The basic rate threshold will increase to £27,491.
-
The higher, advanced, and top rate thresholds will remain unchanged.
2025/26 Income Tax Rates:
|
Band |
Income Range |
Rate |
|
Starter Rate |
£12,571–£15,397 |
19% |
|
Basic Rate |
£15,398–£27,491 |
20% |
|
Intermediate Rate |
£27,492–£43,662 |
21% |
|
Higher Rate |
£43,663–£75,000 |
42% |
|
Advanced Rate |
£75,001–£125,140 |
45% |
|
Top Rate |
Above £125,140 |
48% |
Earnings above £30,300 will generally result in higher tax payments compared to the rest of the UK.
Looking Ahead
One notable upcoming change is the introduction of a Building Safety Levy in Scotland, aligning with similar legislation in England. This will ensure builders contribute to addressing historical safety issues in the construction sector.
Remember this proposed budget is subject to passing legislation through the Scottish Parliament early next year and may be amended.
What Should You Do Next?
The Scottish Budget’s proposals for 2025/26 have implications for everyone, from small business owners to higher earners. Whether you’re seeking clarity on tax changes, relief eligibility, or strategic planning for your business, having a trusted advisor can make all the difference.
Our team at Haines Watts is here to help you navigate these changes with confidence. Reach out today to discuss how we can support your goals.
