On Wednesday 4 December 2024, the Finance Secretary Shona Robison announced the proposed spending and tax plans under the Scottish Budget for 2025-2026. For ease of reference, we have listed the main proposed tax changes below (the proposals need to be approved by the Scottish Government before they can become law):

1. Income Tax rates for Scottish taxpayers

The first three Scottish income tax thresholds are to be increased by 3.5% (the upper thresholds are frozen) and the Scottish Government has confirmed that, for the duration of this parliament, there will be no new income tax bands and no increases to the rates of income tax.

This 3.5% increase applies to the Starter, Basic and Intermediate rates, as set out in the table.

2. Land and Buildings Transaction Tax (LBTT)

Residential rates and bands for LBTT will remain at their current level. The First-Time Buyer Relief which increases the nil rate band from £145,000 to £175,000 will also continue for first-time buyers.

The Additional Dwelling Supplement (ADS) which is broadly payable on purchases of second and subsequent residential properties for £40,000 or above will increase from 6% to 8%. This change will take effect from 5 December 2024. The increase will not apply to transactions where legal missives have been signed on or before 4 December 2024

3. Scottish Landfill Tax (SLfT)

The standard and lower rates of SLfT will be increased from 1 April 2025 to be in line with the announced UK Landfill Tax rates for 2025-26.

The new rates from 1 April 2025 will be:

• Standard rate of SLfT – £126.15 per tonne; and
• Lower rate of SLfT – £4.05 per tonne.

Landfill site operators are also encouraged to make a financial contribution to community and environmental projects through the Scottish Landfill Communities Fund (SLCF). This contribution is a capped proportion of their landfill tax liability. This is currently capped at 5.6% and site operators can then claim 90% of the contribution as a tax credit. The cap will remain at 5.6% for 2025-26.

4. Non-Domestic Rates (NDR)

Broadly, NDR is a tax on occupation of non-domestic property, based on the rateable value of the property multiplied by a value set by the Scottish Government (i.e. a Basic Property Rate, Intermediate Property Rate or Higher Property Rate).

The Scottish Government has announced it will freeze the Basic Property Rate, which is charged to properties with a rateable value up to and including £51,000, at 49.8p.

However, the Intermediate Property Rate will rise from 54.5p in 2024-2025 to 55.4p in 2025-2026. This rate applies to properties with a rateable value from £51,001 up to and including £100,000.

The Higher Property Rate will also rise from 55.9p in 2024-2025 to 56.8p in 2025-2026. This rate will apply to properties with a rateable value above £100,000.

The current Small Business Bonus Scheme and the Business Growth Accelerator reliefs (as well as other reliefs) will continue to be available to businesses. Further, the Scottish Government has announced it will offer a 40% relief in 2025-2026 for business properties in the hospitality sector which are liable for the Basic Property Rate, capped at £110,000 per business; and a 100% relief in 2025-26 for hospitality premises located on islands and in three specific areas (Cape Wrath, Knoydart and Scoraig), also capped at £110,000 per business.

The Scottish Government will maintain all other existing NDR reliefs announced in previous Scottish Budgets, including the multi-year transitional relief schemes announced in the 2023-24 Scottish Budget.