Quick Summary
- Scottish income tax bands widened — the Starter and Basic rate thresholds increased by 7.4%, giving a small tax cut to earners under £29,526, while Higher/Advanced/Top thresholds remain frozen
- English SDLT reverted to £125,000 — Scotland's LBTT is unchanged, meaning Scottish first-time buyers now have a better deal than English ones at most price points
- CGT Business Asset Disposal Relief jumped to 18% — up from 10%, and the new APR/BPR cap (£2.5M) is now in effect for farming and business estates
- Calculate your new position — use our Scottish Income Tax Calculator to see exactly what you'll pay in 2026/27
The 2026/27 tax year started on 6 April 2026. Several changes affect Scottish taxpayers specifically — some helpful, others painful. Here's everything that changed and what it means for your money.
Quick Answer: The biggest changes for 2026/27: Scottish Starter and Basic rate thresholds increased 7.4% (saving most earners £30–£50/year), English Stamp Duty reverted to £125k nil rate (making Scotland cheaper for most buyers), CGT BADR rose from 10% to 18%, APR/BPR for farm and business IHT is now capped at £2.5M, Making Tax Digital starts for self-employed earning over £50k, employer NI secondary threshold dropped to £5,000, and Scottish benefits rose by 3.8% CPI. Use our Scottish Income Tax Calculator for your exact 2026/27 position.
Scottish income tax: bands widened, rates frozen
The Scottish Government's December 2025 Budget widened the Starter and Basic rate bands by 7.4% — broadly in line with inflation. Rates are unchanged across all six bands. Higher, Advanced, and Top rate thresholds remain frozen.
What changed
| Band | 2025/26 | 2026/27 | Change |
|---|---|---|---|
| Starter (19%) | £12,571–£15,397 | £12,571–£16,537 | +£1,140 wider |
| Basic (20%) | £15,398–£27,491 | £16,538–£29,526 | +£2,035 wider |
| Intermediate (21%) | £27,492–£43,662 | £29,527–£43,662 | £2,035 narrower |
| Higher (42%) | £43,663–£75,000 | £43,663–£75,000 | Frozen |
| Advanced (45%) | £75,001–£125,140 | £75,001–£125,140 | Frozen |
| Top (48%) | Over £125,140 | Over £125,140 | Frozen |
What it means for you
The band widening means more of your income is taxed at 19% and 20% rather than 21%. The practical saving is modest — approximately £30–£50 per year for a typical earner in the Intermediate band or above. If you earn under £29,526, you benefit from the wider Basic rate band. If you earn over £43,663, the benefit is capped because the Higher threshold is frozen.
The crossover salary — the point where a Scottish taxpayer pays more than an English one — remains at approximately £30,300. Below that, Scotland is slightly cheaper. Above it, Scotland is more expensive.
Try it yourself
Enter your salary to see your exact 2026/27 Scottish tax bill, with a side-by-side England comparison.
Open Scottish Income Tax CalculatorNo sign-up required.
National Insurance changes
Employee NI: unchanged
Employee NI rates remain at 8% on earnings between £12,570 and £50,270, and 2% above £50,270. No change from 2025/26.
Employer NI: higher costs
The Autumn Budget 2024 changes are now fully in effect:
- Employer NI rate: 15% (up from 13.8%)
- Secondary threshold: £5,000 (down from £9,100)
- Employment Allowance: £10,500 (increased to partially offset)
This doesn't directly reduce your take-home pay, but it increases the cost of employing people — which may affect pay rises, hiring, and small business profitability. Scottish small businesses in particular face pressure from the lower threshold combined with Scotland's higher minimum wage ambitions.
Self-employed NI
- Class 4: 6% on profits £12,570–£50,270, 2% above (unchanged)
- Class 2: Voluntary at £3.80/week (up from £3.45) — still worth paying for State Pension credits
Property tax: Scotland now cheaper than England for most buyers
This is the biggest shift for property buyers. England's temporary Stamp Duty (SDLT) nil-rate band of £250,000 has reverted to £125,000 from April 2025. Scotland's LBTT bands are unchanged.
Price comparison: LBTT vs SDLT at key prices
| Property price | Scotland (LBTT) | England (SDLT, from Apr 2025) | Scotland saves |
|---|---|---|---|
| £150,000 | £100 | £500 | £400 |
| £200,000 | £1,100 | £1,500 | £400 |
| £250,000 | £2,100 | £2,500 | £400 |
| £300,000 | £4,600 | £5,000 | £400 |
| £350,000 | £7,100 | £7,500 | £400 |
Scotland is now cheaper at every price point up to approximately £400,000 — a reversal from 2024/25 when England's temporary £250k nil rate made SDLT cheaper for most purchases.
First-time buyers
Scotland's first-time buyer nil rate (£175,000) is more generous than England's reverted threshold (£125,000 for FTBs too, down from £425,000). On a £200,000 first home:
- Scotland: £500 LBTT
- England: £1,500 SDLT
- Scotland saves: £1,000
Try it yourself
Calculate your exact LBTT on any Scottish property, with first-time buyer relief and an SDLT comparison.
Open LBTT CalculatorNo sign-up required.
Capital Gains Tax: BADR doubled
Business Asset Disposal Relief (BADR) — used when selling a business or business assets — has increased from 10% to 18%. This is a significant change for Scottish business owners and farmers selling up.
On a £500,000 qualifying business sale:
- Old rate (10%): £50,000 CGT
- New rate (18%): £90,000 CGT
- Extra cost: £40,000
The standard CGT rates (18% Basic, 24% Higher) and the £3,000 annual exempt amount are unchanged.
Farming and business inheritance: APR/BPR cap now in effect
From 6 April 2026, Agricultural Property Relief and Business Property Relief are capped at £2.5 million combined per person. Previously unlimited at 100%, relief above the cap drops to 50% — creating an effective 20% IHT rate on the excess.
Key facts:
- £2.5M per person (raised from £1M in December 2025 after farmer protests)
- Transferable between spouses — married couples get £5M combined
- 10-year interest-free instalments available for IHT on APR/BPR assets
- 67% of Scottish farms over 50 hectares are affected (AHDB estimate)
This is the most significant agricultural tax change in a generation. See our Scottish Farm IHT guide and Farm IHT Calculator for the full picture.
Making Tax Digital starts for £50k+ earners
From April 2026, self-employed individuals and landlords with gross income above £50,000 must use MTD-compatible software and file quarterly updates to HMRC. This replaces the annual Self Assessment return with four quarterly submissions plus a final declaration.
- April 2026: £50,000+ gross income threshold
- April 2027: £30,000+ threshold
- Software needed: FreeAgent, Xero, QuickBooks, or other HMRC-approved options
If you're self-employed in Scotland earning above £50,000, you should already be set up. Your first quarterly submission is due by August 2026.
Scottish benefits: 3.8% CPI uplift
All Social Security Scotland payments increased by 3.8% (the September 2025 CPI figure) from April 2026:
| Benefit | 2025/26 | 2026/27 | Weekly increase |
|---|---|---|---|
| Scottish Child Payment | £26.70/week | £28.20/week | +£1.50 |
| Best Start Grant (first child) | £767.45 | £796.65 | One-off |
| Carer Support Payment | £83.30/week | £86.45/week | +£3.15 |
| Winter Heating Payment | £58.75/year | £62.75/year | Annual |
For a family with two children receiving the Scottish Child Payment, the uplift means an extra £156/year (£1.50 × 2 children × 52 weeks).
Student loan thresholds
| Plan | 2025/26 threshold | 2026/27 threshold | Change |
|---|---|---|---|
| Plan 4 (Scotland) | £32,745 | £33,795 | +£1,050 |
| Plan 2 (England post-2012) | £28,470 | £29,385 | +£915 |
| Plan 5 (England post-2023) | £25,000 | £25,000 | Frozen |
| Postgraduate | £21,000 | £21,000 | Frozen |
The Plan 4 threshold increase means Scottish graduates earning around £33,000 will see a small reduction in repayments — approximately £95/year less.
What stayed the same
Several key thresholds remain frozen for 2026/27:
- Personal Allowance: £12,570 (frozen since 2021/22 — scheduled to stay frozen until at least 2028)
- Scottish Higher rate threshold: £43,663 (frozen)
- NI Upper Earnings Limit: £50,270 (frozen)
- LBTT bands and rates: All unchanged
- ADS rate: 8% (unchanged since December 2024)
- Pension annual allowance: £60,000 (unchanged)
- ISA allowance: £20,000 (unchanged)
- CGT annual exempt amount: £3,000 (unchanged)
The continued freeze on the Personal Allowance means fiscal drag — more people are pulled into higher tax bands as wages rise. A Scottish earner on £50,000 who gets a 3% pay rise to £51,500 pays all of the extra £1,500 at 42% — keeping just £870 of it.
The headlines vs reality
| Change | Who benefits | Who loses |
|---|---|---|
| Starter/Basic band widening | Everyone earning under £43,663 | Nobody (but saving is small: ~£30-50) |
| SDLT reversion to £125k | Scottish property buyers (now cheaper vs England) | English buyers (costs rose sharply) |
| BADR to 18% | Nobody | Business sellers, retiring farmers |
| APR/BPR £2.5M cap | Nobody (new tax) | Farming families, business owners |
| MTD for £50k+ | HMRC (better data) | Self-employed (more admin) |
| Benefits +3.8% | Low-income families | Nobody |
| Employer NI to 15% | Nobody | Employers, potentially workers via slower pay rises |
What to do now
-
Check your tax code. Your 2026/27 tax code should be on your April payslip. The standard code is 1257L. If it's different, check why — you may have benefits in kind, underpaid tax from last year, or an incorrect code.
-
Review your pension contributions. The band widening means slightly more of your income is in lower bands — but if you're near £100,000, pension contributions to avoid the 67.5% trap are more important than ever.
-
Update your MTD software if you're self-employed earning over £50,000. Your first quarterly submission is due by August 2026.
-
Claim all Scottish benefits you're entitled to. The 3.8% uplift applies automatically if you're already claiming. If you're not, check mygov.scot/browse/benefits.
-
Get farm IHT advice if you own agricultural property worth over £2.5M. The cap is now in effect and planning should start immediately.
Try it yourself
See exactly what you'll take home in 2026/27 after Scottish income tax, NI, pension, and student loan.
Open Take-Home Pay CalculatorNo sign-up required.
Frequently Asked Questions
Did Scottish income tax rates change for 2026/27?
No. All six rates (19%, 20%, 21%, 42%, 45%, 48%) are unchanged. Only the Starter and Basic band thresholds increased — by 7.4%, in line with inflation. This gives a modest tax cut of approximately £30–£50/year for most earners.
Am I better or worse off in Scotland vs England for 2026/27?
If you earn under approximately £30,300, you pay slightly less income tax in Scotland. Above that, you pay more. The crossover point barely changed from 2025/26. Use our Scotland vs England Calculator for your exact comparison.
When is the Personal Allowance going to increase?
The UK Government has frozen the Personal Allowance at £12,570 since 2021/22. It's currently scheduled to remain frozen until at least 2027/28. Each year it stays frozen, more income is taxed — this "fiscal drag" is the UK Government's single biggest revenue raiser, pulling in billions annually.
Do I need MTD software from April 2026?
Only if you're self-employed or a landlord with gross income above £50,000. If you're below that threshold, the traditional annual Self Assessment return continues. The £30,000 threshold comes in from April 2027.
How much more will Scottish farmers pay in IHT?
It depends entirely on the value of the farm. The first £2.5M of agricultural/business property is still fully relieved. Above that, the effective IHT rate is 20%. A married couple can combine allowances for £5M of full relief. Use our Farm IHT Calculator to model your specific position.
Related Articles
- Scottish Income Tax Rates 2026/27 — full breakdown of all 6 bands
- Scotland vs England Tax Comparison — side-by-side at every salary
- Scottish Farm IHT: APR/BPR Changes — the new £2.5M cap explained
- Self-Employed Tax Scotland — MTD, Class 4 NI, and deductions
- Scottish Benefits Guide — every Scotland-only payment for 2026/27
This article is for informational purposes only and does not constitute financial, tax, or legal advice. Tax rates and thresholds can change — always verify current rates with Revenue Scotland, HMRC, or mygov.scot, and speak to a qualified financial adviser for advice specific to your circumstances.
Sources: Scottish Government — Income Tax 2026/27, HMRC — Income tax rates and Personal Allowances, Revenue Scotland — LBTT, HMRC — Making Tax Digital, Social Security Scotland — Benefit rates