The Scottish Government has published its Budget for 2026–27, setting out tax and spending plans for the year ahead. With public finances under pressure, the Budget focuses on incremental tax changes, continued support for families, and maintaining funding for public services.
This article summarises the main measures and explains how they may affect households across Scotland.
Income Tax Changes for Scottish Taxpayers
The Budget confirms changes to Scottish income tax thresholds, primarily affecting the lower and middle bands. The structure of Scottish income tax remains progressive, with higher marginal rates applying at higher income levels.
The UK-wide personal allowance remains frozen at £12,570.
Scottish Income Tax Bands 2026–27
| Tax Band | Tax Rate | Taxable Income Range |
|---|---|---|
| Starter | 19% | £12,571 – £15,397 |
| Basic | 20% | £15,398 – £27,491 |
| Intermediate | 21% | £27,492 – £43,662 |
| Higher | 42% | £43,663 – £75,000 |
| Advanced | 45% | £75,001 – £125,140 |
| Top | 48% | Over £125,140 |
The effect of these changes is that a slightly larger portion of income is taxed at lower rates, while thresholds for higher and top rates remain unchanged. As a result, the overall impact will vary depending on income level.
Council Tax: New Bands for High-Value Homes and Recategorisation
One of the most significant structural changes in this Budget relates to council tax, particularly for owners of higher-value properties.
New Council Tax Bands Above Band H
Scotland’s council tax system is currently based on 1991 property valuations, with Band H being the highest band. Over time, this has meant that a wide range of modern property values, from relatively expensive homes to very high-value properties, have been grouped into the same band.
The 2026–27 Budget introduces new council tax bands above Band H, specifically targeting homes with a current market value of over £1 million.
Key points:
- New higher bands will apply to properties valued above £1 million.
- These bands sit above the existing Band H, creating a more graduated system at the top end.
- The aim is to better differentiate between high-value and very high-value properties.
Recategorisation of Properties
To apply the new structure, affected homes will be recategorised into the appropriate new band based on their current value.
This is not a full revaluation of all properties. Instead:
- Properties that exceed the new value thresholds will be placed into one of the new top bands.
- Homes below those thresholds will remain in their existing bands.
- The underlying valuation system (based on 1991 values) remains in place for most properties.
Local Authority Flexibility
Local councils will have greater discretion over how council tax is applied within the new structure. This includes:
- Setting council tax rates for the new higher bands
- Deciding how much additional revenue to raise locally
- Applying changes differently depending on local budget pressures
As a result, the impact on individual households will vary depending on:
- Property value
- Local council decisions
- Any future adjustments made at council level
Find out more on our dedicated blog on Council Tax changes in Scotland as part of the Scottish Budget 2026/27.
Support for Families
The Budget has some changes in support for families and children, including:
- An increase to the Scottish Child Payment from April
- Further planned increases for families with babies and very young children
- Ongoing funding for free school meals and other school-based support
These measures are aimed at reducing financial pressure on lower-income households.
Spending on Public Services
Funding commitments in the Budget include:
- Additional investment in primary care and GP services
- Continued support for education initiatives
- Funding for local and community services
While spending has increased in some areas, demand for services continues to rise, and pressures on delivery remain.
Wider Budget Context
The Budget is set against a backdrop of:
- Rising social security costs
- Ongoing pressure on local authority finances
- Limited scope for large tax cuts or major new spending programmes
As a result, many of the changes are targeted rather than wide-ranging.
What This Means for You
In broad terms:
- Lower and middle earners may benefit from changes to income tax thresholds.
- Higher earners continue to face higher marginal rates, with thresholds unchanged at the top.
- Owners of high-value homes (over £1m) may see higher council tax bills due to new bands and recategorisation.
- Families with children are likely to benefit from increased financial support if they have a low income.
- Council tax outcomes will vary depending on local authority decisions.
Summary
The Scottish Budget 2026–27 introduces modest income tax adjustments, structural changes to council tax for high-value properties, and continued targeted support for families and public services. The overall impact will differ by income, property value and location, with most changes being incremental rather than transformational.
