Income Tax Changes and Mansion Tax on £1m Homes in the Scottish Budget
The Scottish government has unveiled its tax and spending proposals for the 2026-27 fiscal year, with significant changes to income tax thresholds and a new mansion tax on homes valued over £1 million. Finance Secretary Shona Robison highlighted that this budget aims to alleviate financial pressures on families while addressing the wealthiest citizens.
Key Highlights of the Scottish Budget for 2026-27
– Income Tax Structure Adjustments:
– Robison announced an alteration in income tax rates, aiming to benefit 55% of Scottish taxpayers. This change means that many will pay less tax compared to those in the rest of the UK.
– Currently, earners below £30,000 enjoy a slightly lower tax rate, but those above face higher taxes.
– The basic rate threshold will increase by 7.4%, from £15,398 to £16,537, while the intermediate rate will rise from £27,492 to £29,527.
– The higher rate (42%) will remain unchanged for earnings above £43,663, with top rates also holding steady.
– Scots earning below £33,500 can expect to save up to £40 annually compared to the rest of the UK, but higher earners could see an increase in their tax burden.
– Mansion Tax Implementation:
– Beginning in April 2028, two new council tax bands will apply to properties valued over £1 million, generating an estimated £14 million in revenue. This is expected to create a fairer tax structure while providing additional funding for local councils.
Additional Fiscal Measures Announced
– Scottish Child Payment Boost:
– The payment for families with infants under the age of one will rise to £40 per week starting in 2027-28.
– Non-Domestic Rates Relief:
– A 15% relief will be introduced, worth £138 million over three years, benefitting the retail, hospitality, and leisure sectors.
– Investment in Infrastructure:
– The budget allocates significant funds for transportation, including nearly £200 million for the dualling of the A9 and key upgrades to the A96.
– Public Sector Reforms:
– Aiming for £1.5 billion in efficiency savings through public sector reforms.
– Expansion of Childcare:
– Plans include after-school and breakfast clubs for all primary schools by August 2027.
– Health and Social Care Investment:
– £22.5 billion committed for health services, including funding for the national rollout of walk-in GP clinics.
Robison emphasized the goal of this budget is to create a stronger NHS and a more prosperous Scotland, stating, To deliver even more for those with the least, we will ask those with the most, the very wealthiest in our land, to contribute that little bit more.
Reactions to the Scottish Budget
– Opposition Response:
– Scottish Conservative finance spokesman Craig Hoy praised the freezes on lower tax thresholds but criticized the lack of support for middle-income earners.
– Labour finance spokesman Michael Marra argued the proposals would not translate into real change, pointing out perceived failings in government fiscal management.
– Scottish Greens expressed satisfaction with the mansion tax and child care proposals but were dismayed at the lack of changes to childcare eligibility.
What’s Next?
The Scottish government will present its detailed budget bill soon, with MSPs beginning debate on the proposals next month. A vote on the bill is scheduled for February 25, where a coalition of support will be essential for its passage. The discussions will be crucial in determining the course of public spending and taxation as the May elections approach.
In conclusion, the income tax changes and mansion tax on £1 million homes reflect the Scottish government’s strategy to balance financial relief for families while ensuring that wealthier citizens contribute their fair share. The coming months will be pivotal in assessing the effectiveness and acceptance of these budget measures.