Scottish Budget 2026: What it means for you
The Scottish Government has published its 2026 Budget, outlining how taxes, public spending, and support for households and businesses will change over the coming years. The decisions made on 13 January will shape your finances, whether you’re planning for a family, thinking about a move, or running a business.
Scottish Budget 2026:What it means for you
Insight from Matthew Lean
As Amber River Johnston Financial Chartered Financial Planner Matthew Lean explains, “What we’re seeing in the 2026 Scottish Budget is a mix of modest immediate support alongside longer-term shifts that will affect people in different ways.”
Increasing thresholds for lower rate income tax bands will help many on lower and middle incomes now, but freezing upper thresholds means fiscal drag could see more income taxed at higher rates over time.
This blend of near-term relief and gradual shifts runs through many of the key elements below, from taxation to family support, business relief, and changes to property tax rules.
"While lower and middle earners may feel an immediate benefit, the frozen upper thresholds mean that over time, rising wages could see more income taxed at higher rates."
1. Income tax changes - a modest boost with a longer-term catch
One of the most important changes in the Scottish Budget is to income tax thresholds.
From April 2026, the basic and intermediate income tax bands will increase by around 7.4%, meaning more of your earnings will be taxed at lower rates before moving into higher brackets.
As Matthew explains, “For a significant proportion of earners, this adjustment will result in a small net benefit to take-home pay. However, because the higher, advanced, and top rate thresholds remain frozen, people earning above those levels are still susceptible to fiscal drag – where inflation and wage growth push you into higher tax bands even without a formal change to rates.”
In other words, while lower and middle earners may feel an immediate benefit, the frozen upper thresholds mean that over time, rising wages could see more income taxed at higher rates.
“It’s the subtle part of the Budget that often gets overlooked,” Matthew adds. “You don’t see an immediate tax rise, but the effect of frozen thresholds against rising incomes is that more of your income can get swept into higher taxation without any fanfare.”
For those already close to higher rate bands, this is an important point to factor into longer-term financial planning.
2. New high-value property council tax bands
From April 2028, the Scottish Government will introduce new council tax bands for high-value homes:
- Band I for homes valued between £1 million and £2million
- Band J for homes valued over £2 million
These bands will attract higher annual bills, with rates to be set locally.
Matthew explains, “If you own property in the £1 million-plus bracket, this change matters – it effectively adds a wealth-linked increase in your housing costs. It isn’t a new tax per se, but moving into a higher band will raise your council tax bill.”
For most homeowners, this won’t affect day-to-day budgeting yet, but it’s a shift worth tracking, especially for those in higher-end markets.
3. Family support and early years help
The Budget includes a boost for Scottish Child Payment, particularly for families with very young children.
From April 2026, the payment for families with a child under one will increase, with a further planned rise to £40 per week from April 2027 for eligible families.
On this, Matthew says, “This kind of targeted support can make a real difference for young families navigating the costs of early parenthood, from childcare to essentials.”
Additionally, funding has been committed to roll out free breakfast clubs to all primary and Additional Support Needs (ASN) schools by August 2027, addressing both cost pressures for families and child wellbeing.
4. Targeted relief for businesses
The Scottish Budget also includes measures designed to assist sectors feeling cost pressures, such as retail, hospitality, and leisure. This includes 15% non-domestic rates relief for eligible premises in 2026–27, valued at around £138 million over three years.
Matthew’s view for business owners, “For bricks-and-mortar businesses in hard-hit sectors, this relief offers breathing room. It won’t solve all cost challenges, but it should help smaller operators manage operating costs into 2027.”
5. New travel-related taxes on the horizon
Looking further ahead, the Budget sets out plans to introduce a new Airport Departure Tax from April 2027, replacing Airport Passenger Duty in Scotland, with a private jet levy to follow.
Matthew comments, “The travel-related taxes are clearly aimed at higher-frequency and premium travel sectors. For most people planning a holiday or occasional trip by air, the immediate impact may be small, but the trend is toward using tax policy as both a revenue and environmental lever.”
"This Budget isn’t dramatic, but it does contain important structural changes."
6. Education and skills funding
Colleges across Scotland will see a 10% funding increase in 2026-27, worth around £70 million, reflecting a continued emphasis on skills and further education.
“Investment in further education is crucial for workforce development,” Matthew highlights. “Whether you’re thinking about retraining, apprenticeships, or supporting younger family members into work, stronger college funding underpins those opportunities.”
What this Budget really signals
Taken together, the changes in the 2026 Budget reflect incremental adjustments rather than headline tax rises, with an emphasis on:
- Supporting lower and middle incomes now
- Introducing longer-term shifts (like fiscal drag and new council tax bands)
- Targeted support for families, education, and business sectors
As Matthew sums it up, “This Budget isn’t dramatic, but it does contain important structural changes. Understanding how and when those changes affect you, not just what they are, is key to effective financial planning.”
Planning considerations
Depending on your circumstances, it’s worth reviewing:
- Your income trajectory relative to tax thresholds
- Property ownership and the impact of higher council tax bands
- Family support entitlements and childcare costs
- Business premises eligibility for reliefs
Budget policy doesn’t operate in a vacuum, your personal situation will determine its real-world impact.
Want to understand what the Scottish Budget could mean for you?
Budget changes often feel abstract until mapped onto your own income, property, or financial goals. A tailored financial review can help you understand the implications and plan confidently for the years ahead.
Want clear guidance on what the Budget means for you?
Visit our Budget Hub for expert insights, predictions and analysis to help you understand how potential changes could affect your financial plans.
Or speak directly with an Amber River adviser for personalised guidance.
