Scottish Budget summary 2024

5 December 2024

Yesterday the Scottish Finance Secretary, Shona Robison, announced the Scottish Government’s tax and spending plans for the year from 1 April 2025. There was a collective sigh of relief when she confirmed there would be no further income tax bands introduced this year, but she did raise the Land and Buildings Transaction Tax (LBTT) surcharge for those buying a second residential property in another blow to the rental industry.

Scottish Income Tax

The Finance Secretary announced that there would be no additional income tax bands introduced, and they would continue with the six-band structure for 2025/26. Ms Robison also confirmed there would be no changes to the rates of income tax meaning Scottish taxpayers will continue to face higher rates than their counterparts in the rest of the UK.

There were increases announced to the basic and intermediate rate thresholds which means that Scottish taxpayers earning less than £30,319 will pay less than their counterparts south of the border, although the maximum saving is only £28.27 per year, or 54p per week.

The higher, advanced and top rate thresholds were again frozen meaning there will continue to be particularly punitive pinch points for Scottish taxpayers, including those earning over £43,663 where they will suffer an effective rate of tax of 50% on income up to £50,270. This is due to the 42% Scottish income tax rate and the 8% National Insurance rate that applies in this range. On the same salary in the rest of the UK, the effective rate is 28% as the income tax and National Insurance bands are aligned.

Similarly, Scottish taxpayers earning more than £100,000 will suffer an effective rate of 69.5% up to £125,140 due to the erosion of the personal allowance, compared to 62% for taxpayers in the rest of the UK.

Land and Buildings Transaction Tax (LBTT)

LBTT is applied to residential and non-residential land and building transactions in Scotland and the Scottish Government decided there would be no changes to the standard LBTT rates and bands for 2025/26. However, Ms Robison announced the Additional Dwelling Supplement (ADS), which normally applies on the purchase of a second residential property in Scotland valued above £40,000, will increase from 6% to 8%. This increase is effective for purchases completing on or after 5 December 2024, unless a contract has been entered into before this date. The Scottish Government stated this increase is intended to disincentivise the ownership of multiple residential properties as part of their commitment to protect opportunities for first-time buyers.

Land and Buildings Transaction Tax – 2025/26
Residential conveyances		Non-residential conveyances		Non-residential leases
Purchase price	LBTT rate	Purchase price	LBTT rate	Net present value of rent payable	LBTT rate
Up to £145,000	0%	Up to £150,000	0%	Up to £150,000	0%
£145,001 to £250,000*	2%	£150,001 to £250,000	1%	£150,001 to £2m	1%
£250,001 to £325,000	5%	Over £250,000	5%	Over £2m	2%
£325,001 to £750,000	10%
Over £750,000	12%

* First-time buyers are entitled to LBTT relief up to £175,000.

Other Announcements from the Scottish Budget 2024

The Basic Property Rate for Non-Domestic Rates (Business Rates) will be frozen at 49.8p, with the Intermediate Property Rate and the Higher Property Rate set to rise with inflation.
The Small Business Bonus Scheme will be protected, offering 40% relief in 2025/26 to properties in the hospitality sector, capped at £110,000 per business.
The Standard Rate of Scottish Landfill Tax will increase to £126.15 per tonne as of 1 April 2025, with the Lower Rate increasing to £4.05 per tonne from the same date.
The Government has pledged to deliver funding to restore a universal Winter Heating Payment to every pensioner household.
The Government has also pledged to scrap the two-child cap which currently prevents parents from claiming universal credit or child tax credit for more than two children from 2026.

UK Budget Announcements affecting Scottish Taxpayers

With limited tax-raising powers, the announcements from the Scottish Government were always going to be limited but many of the announcements in the UK Budget on 30 October will affect Scottish taxpayers. These UK-wide announcements include:

Business Relief (BR) and Agricultural Property Relief (APR) have been overhauled to introduce an upper limit of £1m from April 2026, such that the first £1m of combined agricultural and business assets will receive relief from Inheritance Tax (IHT) at 100%, and any value in excess of this threshold will only obtain relief at 50%.
The Nil Rate Band (NRB) and Residence Nil Rate Bands (RNRB) for IHT will remain frozen at £325,000 and £175,000 until 2030.
Unused pension pots will form part of an individual’s estate for IHT purposes from April 2027.
From 6 April 2025, an individual’s exposure to IHT will no longer be determined by their domicile status and will instead be based on their historical residency status.
Capital Gains Tax (CGT) rates increased from 10% and 20% to 18% and 24% for all types of assets disposed of from 30 October 2024.
Business Asset Disposal Relief (BADR) (formerly Entrepreneurs’ Relief) rates are increasing to 14% from 6 April 2025 and then to 18% in April 2026.
Employer National Insurance Contributions (NIC) will increase to 15% from 13.8% as of April 2025, with the threshold over which employer contributions are paid being reduced from £9,100 to £5,000.
National Minimum Wage (NMW) rates will increase from £11.44 to £12.21 per hour from 1 April 2025 for those over the age of 21.
VAT at 20% will be introduced on private school education for terms starting on or after 1 January 2025.
The Non-Domicile regime will be abolished as of April 2025, being replaced with a new residency-based system and a raft of transitional provisions.

What’s next?

The SNP will need support from some of the opposition to have its tax and spending plans approved which may mean we see some negotiations and compromises around the spending plans before a bill can be passed into law next year. The tax proposals in this Budget seem relatively uncontroversial so are unlikely to form the basis of any fierce debate, but several parties have suggested they would look at a complete overhaul of the Scottish income tax system if they are successful in the 2026 Holyrood elections.