Scottish Budget delivers another blow to private landlords
Ahead of 4 December’s Scottish Budget statement, Finance Secretary Shona Robison was facing significant pressure to narrow income tax differences and provide support for hard-pressed businesses hit by recent National Insurance hikes, among other persistent financial challenges.
In a Budget address labelled as “by Scotland, for Scotland”, what did the Finance Secretary announce?
Additional Dwelling Supplement
In a blow to private landlords and buy-to-let (BTL) investors, the Additional Dwelling Supplement (ADS), which is charged when an additional residential property is purchased in Scotland, will increase to 8% from 6% as of 5 December. Private landlords are facing significant challenges currently and this announcement will cause more concern within the sector. If you are concerned about the impact on your BTL portfolio or would like a review of your structure, please get in touch.
Business rates
- 40% non-domestic rates relief, capped at £110,000 per business, will be provided for those in hospitality sector. This applies on premises with rateable values up to and including £51,000.
- Also capped at £110,000 per business, the 100% relief has been maintained for hospitality properties.
More information on Scottish business rates available here.
Income tax
Last year, higher earners were hit with a new 45% ‘advanced rate’ for income between £75,001 and £125,140. This exacerbated an already diverging income tax regime between Scotland and the rest of the UK. As examples, the following differences have emerged, based on the announced 2025/26 rates:
- £2,082 more tax paid in Scotland on earnings of £75,000
- £5,217 more tax paid in Scotland on earnings of £125,140
- £5,963 more tax paid in Scotland on earnings of £150,000
Additionally, a disparity between tax bands and NIC bands, causes a Scottish taxpayer to pay main rate NIC as well as higher rate tax. There was no real change on this front. A positive is that income tax will not be increased. Instead, in an attempt to support low and medium earners, income tax support was announced. This support will take the form of a 3.5% increase in the basic (currently £14,877 to £26,561) and intermediate (currently £26,562 to £43,662) band thresholds, meaning more income will be taxed at lower rates. There was also a commitment to not introduce any new bands for the rest of parliament to May 2026.
Updated Scottish income tax rates and bands for 2025/26:
Taxable income | Band | Tax rate
£12,571* to £15,397 | Starter rate | 19% |
|---|---|---|
£15,398 to £27,491 | Scottish basic rate | 20% |
£27,492 to £43,662 | Intermediate rate | 21% |
£43,663 to £75,000 | Higher rate | 42% |
£75,001 to £125,140** | Advanced rate | 45% |
Above £125,140 | Top rate | 48% |
*Assumes individuals are in receipt of the standard Personal Allowance.
**Those earning more than £100,000 will see their Personal Allowance reduced by £1 for every £2 earned over £100,000.
Pension planning
While income tax won’t be changing much, you may wish to assess the level of pension contributions you’re making. It may, in some circumstances, make financial sense to increase your contributions, but a specialist should be engaged prior to taking this action. Specialists from our sister company, Azets Wealth Management, are on hand to support you with optimising your pension planning.
We are here to help
If you have any questions on the announcements, or the possible impact on you or your business, please get in touch with your usual Azets advisor or a member of our specialist team.
Register for our upcoming webinars
Navigating the cost of business crisis
Monday 16 December | 2:00pm
Join our panel of experts as they host a webinar exploring the current business landscape, impending changes, strategies to minimise the financial impact, and practical approaches to managing business debt and sourcing critical funding.
Helping farmers to understand and plan for Inheritance Tax changes
Tuesday 17 December | 12:00pm
At this webinar, our specialists will break down the detail behind the changes in inheritance tax for farms, provide an update on any developments, and discuss key areas of focus.
The information contained within this insight is for guidance only and does not constitute advice which should be sought before taking any action or inaction.