Key announcements in the Scottish Budget for 2025/6

6 December 2024

Last updated: 9 December 2024

Justine Riccomini
Head of Tax (Employment and devolved taxes), ICAS

Earlier this week, the Scottish Finance Cabinet Secretary, Shona Robison, set out her draft tax and spending plans for the 2025/26 financial year. Here we set out the key tax announcements from the Scottish Budget.

Budget documents

Alongside the spending commitments and tax raising measures announced as part of the Budget speech, the Scottish Government published its 'Scotland’s Tax Strategy: Building on our Tax Principles' document. The government stated that the strategy document “sets out the next steps in the Scottish Government’s approach to tax, building on the 2021 Framework for Tax, to provide certainty and stability for taxpayers and businesses, and for the continued development of our evidence for tax policy into the future”.

However, we think the document reads more like a collection of facts combined with short-term forecasting, rather than a strategic future positioning paper. And given the Parliamentary term ends in Spring 2026, it can only really ever be a short-term optic, which is not what individuals and businesses need to bring certainty and stability into their day-to-day affairs.

The following documents were also published:

Income Tax announcements

For 2025-26, the Starter rate band will increase by 22.6% and the Basic rate band will increase by 6.6%. The result is that the thresholds for paying both the Basic and Intermediate rates of tax will increase by 3.5%.
The Higher, Advanced and Top rate thresholds will be frozen to the end of the current parliamentary term in Spring 2026.

The Scottish Government also committed to:

Not introduce any new bands or increase the rates of Scottish Income Tax until the end of the Parliamentary term, other than as stated above by a minimum of inflation.
Maintain the commitment that over half of Scottish taxpayers will pay less Income Tax than they do in the rest of the UK.
Uprate the Starter and Basic rate bands by a minimum of inflation.

The current draft Scottish Income Tax policy proposals 2025-26

This table sets out the rates and bands proposed by the Scottish Government:

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%

*Assumes individuals are in receipt of the Standard UK Personal Allowance.
**Those earning more than £100,000 will see their Personal Allowance reduced by £1 for every £2 earned over £100,000.

LBTT announcements

Existing residential and non-residential Land and Buildings Transaction Tax (LBTT) rates and bands will remain unchanged.
The LBTT Additional Dwelling Supplement (ADS) rate will increase from 6% to 8% for transactions with an effective date on or after 5 December 2024. Transitional arrangements mean that any increase won’t apply where the contract for a transaction was entered into prior to 5 December 2024.
The Scottish Government has said it will launch a review of some aspects of LBTT in Spring 2025, to inform decisions in the next Parliament relating to potential legislative changes.
The Scottish Government has promised to introduce legislation to clarify claw back arrangements in sub-sale development relief and provide for the availability of LBTT group relief in instances of non-partition demergers.
A consultation will commence in early 2025 on draft legislation to provide relief from LBTT on the exchange of units within Co-ownership Authorised Contractual Schemes (CoACS) investing in Scottish property.
A consultation will also be run seeking views on the case for introducing a LBTT relief for the seeding of properties from existing unauthorised investment vehicles into Property Authorised Investment Funds (PAIFs) and CoACS.

The latter three points have been discussed in various round tables since LBTT first began and the Law Society for Scotland has been instrumental in bringing about these changes, with the support of ICAS.

LBTT rates and bands for 2025-26

	Residential Conveyances*		Non-Residential Conveyances		Non-Residential Leases**
Band	Relevant consideration	Rate	Relevant consideration	Rate	Net present value of rent payable	Rate
Nil rate band	Up to £145,000	0%	Up to £150,000	0%	Up to £150,000	0%
First tax band	Above £145,000 to £250,000	2%	Above £150,000 to £250,000	1%	Above £150,000 to £2m	1%
Second tax band	Above £250,000 to £325,000	5%	Above £250,000	5%	Above £2m	2%
Third tax band	Above £325,000 to £750,000	10%
Fourth tax band	Above £750,000	12%

*If the first-time buyer relief applies, the effect is to increase the nil rate band to £175,000.
** LBTT on lease premiums is payable at the same rates and bands as non-residential conveyances.

In addition, the ADS may apply to the total price of the property for all relevant transactions of £40,000 or more, and will be charged in addition to the rates set out above. This will apply at a rate of 8% for transactions with an effective date from 5 December 2024, unless the transitional provisions apply.

Policy intent review

The Scottish Government will conduct a review of various aspects of residential and non-residential LBTT arrangements to make sure they continue to meet their policy intent, or (where potential amendments are identified) to inform decisions taken by the next Parliament.

ICAS expects to contribute to these discussions.

Scottish Landfill Tax announcements

The standard rate of tax will be increased to £126.15 per tonne and the lower rate to £4.05 per tonne from 1 April 2025, matching the UK Landfill Tax rates and taking account of actual inflation in recent years.
The Scottish Government will consult to inform decisions on the future of the Scottish Landfill Communities Fund. Arrangements for the Fund will not change in 2025-26.

Non-domestic rates announcements

The Basic Property Rate will be frozen at 49.8p (for properties with a rateable value up to and including £51,000) in 2025-26.
The Small Business Bonus Scheme will be maintained in 2025-26 at the rates and thresholds introduced in 2023-24.
There will be inflationary increases (1.7%) to the Intermediate Property Rate (55.4p) and Higher Property Rate (56.8p) in 2025-26.
100% relief will continue in 2025-26, capped at £110,000 per business, for hospitality premises located on islands and in prescribed remote areas.
A new 40% relief will be introduced for 2025-26, capped at £110,000 per business, for hospitality premises (including music venues with a capacity up to 1,500) liable for the Basic Property Rate (those with a rateable value up to and including £51,000) in mainland Scotland (excluding specified remote areas).

ICAS resources

To find out more, join us for our ‘Autumn Tax Update Part Three: Devolved taxes’ webinar. Taking place on Thursday 12 December at 11am, this online discussion will cover how the UK and Scottish Budgets affect you and your clients.

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