Scotland’s 2026–27 Budget sets out changes to personal income tax bands and outlines plans for new devolved levies from 2027–28, while keeping corporate tax rates unchanged and focusing on revenue stability, tax fairness, and long-term support for business and investment. 

RF Report

Scotland’s Cabinet Secretary for Finance and Local Government presented the 2026-27 State Budget to the parliament on 13 January 2026. The Budget’s key proposals include higher personal income tax brackets and the introduction of new levies, effective from April 2027 and 2028.

Corporate tax 

Corporate tax rates will remain unchanged.  Companies in Scotland are subject to UK Corporation Tax on their profits. The main Corporation Tax rate is 25% for companies with profits of GBP 250,000 or more and applies to all profits, while a Small Profits Rate of 19% applies to companies with profits of GBP 50,000 or less.

Value added tax (VAT)

VAT-registered businesses must charge VAT, and registration is required when annual turnover exceeds GBP 85,000. VAT rates vary by supply: the standard rate is 20%, a reduced rate of 5% applies to certain items such as utilities, and a zero rate applies to specific goods, including books and children’s clothing.

Personal income tax

From 6 April 2026, the income tax thresholds for the basic and intermediate rates will increase, while the thresholds for the higher, advanced, and top rates will remain unchanged.

The rates for 2026-27 will be as follows:

Band Income range(GBP) Rate (%)
Starter rate 12,570 – 16,537 19%
Basic rate 16,538 – 29,526 20%
Intermediate rate 29,527 – 43,662 21%
Higher rate 43,663 – 75,000 42%
Advanced rate 75,001 – 125,140 45%
Top rate Over 125,141 48%

Other tax measures

Land and Buildings Transaction Tax rates in Scotland will remain unchanged, and Scottish Landfill Tax rates will continue to align with those applied elsewhere in the UK.

New and reformed taxes

  • Air departure tax (ADT): To be introduced from April 2027, including a framework to add a private jet supplement.
  • Scottish aggregates tax (SAT): Launching in April 2026, with first-year rates aligned to the UK Aggregates Levy.
  • Building safety levy (BSL): Scheduled to take effect from April 2028.

Council tax reform for high-value properties

  • Two new Council Tax bands will be introduced by April 2028 for residential properties valued at over GBP 1 million, based on updated valuations.
  • The measure targets fewer than 1% of households, improving fairness at the top end while leaving the wider Council Tax system unchanged.

Income and property tax measures

  • Higher, Advanced, and Top income tax thresholds will be frozen to strengthen revenues while maintaining progressivity.
  • Existing Land and Buildings Transaction Tax (LBTT) rates will be maintained.
  • Scottish Landfill Tax rates will continue to align with equivalent UK rates to ensure consistency and simplicity.

Business and investment support

  • Measures will be introduced to support high-growth firms, attract private investment, and better connect entrepreneurs.

Completion of devolved tax powers

  • The rollout of ADT, SAT, and BSL completes the delivery of new taxes committed under the Scotland Act powers.