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Scottish Budget 2026 - Hidden Tax Traps for Expats and High Earners?


Scottish Budget 2026 webinar by Expat UK Tax

Could earning £80,000 in Scotland really mean paying around £2,300 more in income tax compared with England from April 2026?  

 

The Scottish Budget 2026 introduces only limited relief for lower earners, while freezing upper tax bands.  

 

Scottish Budget link here: https://www.gov.scot/budget/ 

 

Key Income Tax Changes 

The Budget provides a modest 7.4% uplift to Starter and Basic thresholds (up to £29,526). However, freezes Higher (£43,663+ at 42%), Advanced (£75,001+ at 45%), and Top (£125,140+ at 48%) thresholds remain frozen.  

 

This deepens the fiscal drag that has already doubled the number of higher-rate taxpayers in Scotland since 2020.  

 

Further tax increases include: 

  • Dividend taxes rise 2% from April 2026. 

  • Savings tax rates increase by 2% from April 2027. 

  • The headline “tax-cut” for low earners is capped at £40per year, which is quickly eroded by inflation.  

 

For individuals with multiple homes in both England and Scotland, their residence status becomes increasingly important. A review of the “close connection” test used to determine Scottish tax may trigger unintended consequences.  

 

Potential Changes to Come 

A wider set of reforms signals a shift towards wealth-based taxation, imposing an annual charge on properties valued over £1 million.  

 

New Council Tax Bands (From 2028) 

  • Band I for homes over £1 million 

  • Band J for homes over £2 million 

 

Rates are still to be confirmed, but valuations will be based on gross property value, ignoring any mortgages.  

 

Proposed Wealth Tax 

The Scottish Government are proposing a 2% annual wealth tax on individual net assets above £10 million, aimed at raising approximately £500 million, a policy directed targeting Scotland’s top families.  

 

Other Taxes 

  • LBTT (Land and Buildings Transaction Tax) remains significantly higher than England’s SDLT, particularly for mid-range properties. 

  • Air Departure Tax is scheduled for 2027, with private jet surcharges 2028. 

  • A future Property Income Tax looms ad under consideration. 

 

These reforms raise broader questions:  

Is this truly “progressive”, or does it risk discouraging inward investment, mobility, and long-term prosperity? 

 


Download Our Exclusive Scottish Budget 2026 Presentation 

For a full breakdown of the measures and overview of the Budget, download our presentation delivered by Stephanie Chan, Tax Director.  

 


 
 
 

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