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 — rises to approximately £33,500 (up from ~£30,300 in 2025/26). 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 £3.65/week — 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 is £175,000; England's is more generous at £300,000 (reverted from the temporary £425,000 relief that ended in April 2025). On a £200,000 first home:
- Scotland: £500 LBTT (2% on the £25,000 above £175,000)
- England: £0 SDLT (below the £300,000 first-time-buyer nil rate)
- England saves: £500
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 | £62.00/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 £33,500, you pay slightly less income tax in Scotland. Above that, you pay more. The crossover point rose from ~£30,300 in 2025/26, as the Starter and Basic rate thresholds increased. 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
- Making Tax Digital Scotland — MTD rollout deadlines and software requirements
- Scottish Election 2026: Each Party's Tax Plans — what the May 2026 result could mean for future Scottish tax rates
- Self-Employed Tax Scotland — MTD, Class 4 NI, and deductions
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