No change to income tax

This year’s Scottish Budget brought confirmation that there would be no increase in the number of tax bands – there are currently six. They also confirmed there would not be any increase to the rates of tax on these bands, not only for 2025-26, but also for the remainder of this Parliament – another tax year.

Increase in basic and intermediate rate thresholds

For 2025-26, there will be a 3.5% increase in basic and intermediate rate thresholds to £15,397 and £27,491 respectively. Furthermore, it was confirmed that these two thresholds will rise by at least the rate of inflation for the rest of this Parliament.

Because Chancellor Rachel Reeves has frozen those thresholds in the rest of the UK, this means a Scottish taxpayer will pay less tax than the rest of the UK if their earnings, rental and trust income are £30,317 or less. In reality, the difference is less than £30 a year, but it allows Robison to say that 51% of Scottish taxpayers pay less.

Additionally it was announced that there will be no change to the remaining thresholds.

The additional dwellings supplement (ADS) to increase

ADS, the extra Land and Buildings Transaction Tax (LBTT) payable on certain residential property purchases is to increase again from 6% to 8% and is effective from 5 December 2024, unless missives for a purchase were concluded before that date.

This pushes the highest marginal rate of LBTT up to 20%. The total LBTT on the purchase of a buy-to-let property for £200,000 is now £17,100, of which £16,000 is the ADS.

While the ADS is often referred to as a ‘second homes tax’, it’s much more complex than that and the costs can be quite unexpected for many purchasers.

Multiple dwellings relief or two or more dwellings to remain

Unlike England, Wales and Northern Ireland, Scotland has retained LBTT multiple dwellings relief on purchases or two or more dwellings. However, the finer details state that the Scottish Government will review certain aspects of residential and non-residential LBTT – so this could change in the future.

Scrapping the two-child benefit cap

Arguably the biggest announcement in this year’s Budget wasn’t part of the tax or spending plans for next year. It was that the Scottish government are vowing to scrap the two-child benefits cap.

As this is a UK-wide policy, imposed by the Department of Work and Pensions on welfare payments such as universal credit and child tax credits, it will take time, and require help from the UK government before we see results. But if all goes to plan then the SNP government will start sending out payments to families of the children affected in April 2026 – one month before the next Holyrood election.

Fraser Kerr, Regional Director at abrdn Financial Planning, shares his views

‘The Scottish Budget, unveiled recently, leans more toward evolution than revolution. It builds incrementally on existing policies rather than introducing dramatic shifts. For financial planning clients, this steady approach offers both challenges and opportunities. While it may lack sweeping reforms, subtle changes – such as tweaks to income tax bands, thresholds, or allowances – can still impact your financial plans, especially if you're navigating Scotland’s distinct tax landscape.

‘It’s essential to review these changes with your financial planner to understand their implications on your specific circumstances. However, it’s equally crucial to keep sight of your long-term goals and objectives. Budgets can prompt adjustments, but they shouldn’t derail well-thought-out strategies aimed at securing your financial future.

‘As always, remember that financial planning is not about reacting to every policy announcement but maintaining a focused, goal-oriented approach. Consulting your financial adviser ensures you're making informed decisions that align with your personal objectives, regardless of broader fiscal policies.’

We’re here to help

If you have any questions or concerns about the Scottish Budget and how the changes may affect you, get in touch with your abrdn financial planner. They’re here to help you.

If you don’t already have a planner, getting professional financial advice can help get your affairs in order. While there’s generally a charge for advice services, this could pay for itself in the long run by way of improved returns on your money, tax savings and, importantly, peace of mind.

Find out how abrdn's financial planning services could help you make the most of the latest tax changes.

The information in this article should not be regarded as financial advice. Please remember that the value of investments can go down as well as up and may be worth less than was paid in. Tax rules can always change in the future. Your own circumstances and where you live in the UK could have an impact on tax treatment. Information is based on abrdn’s understanding in December 2024.