Scottish Budget - Rathbones comments

Commenting, Angus Kerr, Head of Scotland, based in the Glasgow office, at Rathbones, says: “This was a Budget trying to marry ambition with tight affordability constraints. Despite a small boost from Barnett consequentials, Scotland still faced a sizeable capital spending gap, and with revenues under pressure, fiscal headroom is the narrowest it’s been in years.

“That challenge is reflected in plans to deliver £1.5bn in efficiencies through public‑sector reforms, alongside measures asking the wealthiest to contribute more via Holyrood’s version of a mansion tax and a private jet levy. Ministers are walking a tightrope: protecting essential services while managing a shrinking capital budget in a highly uncertain environment.

“Meanwhile, speculation over potential UK‑wide changes to inheritance tax, CGT and pensions continues to loom large in our conversations with clients - reminders that decisions at Westminster still shape long‑term financial planning in Scotland.”

Income tax

Kindar Brown, Senior Financial Planner at Rathbones, based in the Edinburgh office, says: “The biggest surprise was the above‑inflation rise in the basic and intermediate rate tax thresholds - a stark contrast to Westminster’s decision to extend its freeze. This functions as a real‑terms tax cut for low and middle earners and is genuinely good news for those Scottish taxpayers who will pay less tax than the rest of the UK. The higher, advanced and top rate thresholds will however remain the same.”

New council tax bands on property worth £1 million+

Stephen Cotter, Financial Planning Area Lead, based in the Glasgow office, at Rathbones says: “The Finance Secretary has effectively introduced Holyrood’s version of a mansion tax, with two new council tax bands for properties valued at £1 million or more due to take effect by 2028.

“We still need clarity on how such properties will be valued for council tax purposes, but the announcement alone could distort activity at the top end of the market as buyers and sellers adjust ahead of the changes. While some wealthier homeowners may absorb the extra cost, others may reconsider the long‑term implications of purchasing in this price bracket.

“Economically, the measure risks creating price cliffs at the threshold, discouraging transactions and renovations. That could slow housing market activity and potentially reduce overall tax revenues - ultimately working against the government’s wider objectives.”

Dividends and property income

Kindar Brown says: “The UK Budget confirmed a 2% rise on dividend income from April 2026, and on savings and property income from April 2027. Property income is devolved, and the Scottish Government has chosen not to follow Westminster’s lead - a decision that will come as a relief to landlords and tenants who may otherwise have faced higher rents.

“However, the increases to dividend and savings income will still apply in Scotland, as these remain reserved to Westminster. With the Scottish Government only able to set rates and bands on non‑savings and non‑dividend income, households should be prepared for the combined impact of tax decisions made on both sides of the border.”

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