Yesterday, the Cabinet Secretary for Finance and Local Government, Shona Robison unveiled the Scottish Budget for the 2025/26 Financial Year, which she said, “offers hope for Scotland’s future.” Although the main focus was centred around Government spending, in addition there were several key announcements relating to tax matters.
Income Tax
The Scottish Parliament has the power to set income tax rates and bands for the non-savings, non-dividend income of Scottish taxpayers.
From April 2025, the Scottish starter (19%) and basic rate (20%) bands will be increased. The starter band will apply to income between £12,571 to £15,397 and the basic band will apply to income between £15,398 to £27,491. The result of this will be that the intermediate rate (21%) will start at £27,492 (previously £26,562). Going forward, the starter and basic rates will be uprated by at least inflation.
In further welcome news, it was confirmed that no new income tax bands will be introduced for the remainder of the Parliament, nor will there be any increases in the Scottish rates.
Land and Buildings Transaction Tax (LBTT)
In a blow for property investors, the Additional Dwelling Supplement (ADS) charge which can apply to individuals, companies and trusts on the purchase of property in certain cases, will increase from 6% to 8%, with effect from 5 December 2024. Transactions where missives were signed on, or before 5 December will not generally be affected. The increase in the ADS rate mirrors the 2% increase to the equivalent in England under the Stamp Duty Land Tax (SDLT), which was announced in October’s UK Autumn Budget. However, the rate applying under SDLT is 5% compared to the 8% ADS rate which will now apply in Scotland.
Multiple Dwellings Relief, which can be claimed to reduce the LBTT liability where more than one dwelling is purchased at the same time, remains in force in Scotland, notwithstanding the fact that it was abolished under the SDLT regime earlier this year in England.
All other LBTT rates and bands remain the same.
The Scottish Government plans to carry out a review of LBTT over the remainder of the Parliament, commencing Spring 2025, to ensure that the policy intent of this tax is being met. It is therefore quite possible that further changes may follow, notwithstanding the fact that changes were already made to the tax earlier this year.
Scottish Landfill Tax (SLFT)
Legislation will be introduced to increase the standard and lower rates of SLFT from 1 April 2025, to align them with the UK Landfill Tax rates which were increased previously, citing a concern that lower rates could result in the movement of waste to Scotland from the rest of the UK. The standard rate will increase from 1 April 2025 to £126.15 per tonne and the lower rate to £4.05 per tonne.
If you are looking for advice on how these changes may impact you, please contact our Tax team.
