What does the Autumn Budget 2026 mean for Scotland?

The 2026 Autumn Budget was announced on Wednesday 28 October. We look at what some of the implications of the announcements could mean for Scotland.

Most of the tax measures announced in the 2026 UK Budget will have an impact on Scottish taxpayers as they relate to reserved areas. This is where power is still held by Westminster rather than the devolved nations. However, many other Budget decisions will impact on Scottish funding by way of the block grant. Ahead of the Scottish Budget on 3 December, the Scottish Government will now be assessing what the UK Budget means for Scotland.

Outlook for Scottish funding 

The Budget announcements mean the Scottish Government will receive an additional £600m over the next four years. This is made up of an increase in resource funding (+£866m), a reduction in capital funding (-£338m) and some other smaller movements.

Source: Breathing space for households, and for Scottish public finances? – SPICe Spotlight | Solas air SPICe

The Scottish Government’s response states that there will be a 1.3% cut to resource funding in real terms in 2027-28. You may have felt confused about whether we’re seeing an increase or a decrease in funding. However, in this case, both are correct.

There is an additional funding amount, but when adjusted for inflation, the planned resource funding would be a cut in real terms. In 2026-27, there is £43.7bn for Scotland in resource funding, and in 2027-28, this is planned to be £44bn. So, the Scottish Government may have more cash in their budget, but they won’t be able to make it go as far due to the cost of goods and services rising. 

The two main types of funding are:

• Resource funding, which covers day-to-day operational spending, such as public sector wages and core administrative expenses. 
• Capital funding, which supports long-term physical assets and infrastructure. 

Although we're seeing a reduction in capital funding every year until 2030, the Scottish Government can choose to allocate some of the additional resource funding to capital funding.

Carer’s allowance

Carer’s allowance is a devolved benefit so the announcements in the Budget that it will now operate as a taper from 2030-31 don’t apply in Scotland. Previously it had operated as an all-or-nothing cliff edge where carers lost the entire benefit.

Scotland will receive additional funding through a higher social security block grant adjustment. Therefore, the Scottish Government may decide to introduce a similar taper for the Carer Support benefit, but it can choose to use the additional funds elsewhere.

£100 energy support payment 

The Chancellor announced a £100 energy support payment for households in England living in council tax band A-D properties.

The payment will not directly apply to households in Scotland or Wales, but it does mean there’s a positive Barnett consequential. This means there’s more funding available for the devolved nations, although each government can choose how to use it.

Deputy First Minister Jenny Gilruth has committed to ensuring that households in Scotland benefit from the £100 payment for energy bills support. Further details will likely be announced in the Scottish Budget.

Business rates

Support for the high street and smaller shops was a focus for the UK Budget.

From April 2027, the threshold for the 100% Small Business Rates Relief will rise from £12,000 to £18,000. The tapered relief threshold will also increase from £15,000 to £21,000.

Despite offering help for smaller businesses, the structure of the business rates system creates a sharp cut-off in relief. This could encourage some businesses to bunch under the limits instead of expanding their operations.

Business rates are devolved, so this will not apply directly in Scotland and Wales. However, positive Barnett consequentials will provide additional funding that can be used in any area. The Scottish Budget on 3 December may clarify whether the Scottish Government will use it for non-domestic rates relief or in another area.

Pension allowance

The UK Budget introduced a new income tax allowance for pensions to protect pensioners from paying income tax on the State Pension.

From 2027, the full State Pension will be £13,036, which is above the current personal allowance of £12,750. This means many pensioners with small amounts of tax would be brought into the self-assessment system. Private pensions are paid net of tax, so they withhold any PAYE due before paying out the pension amount. However, the systems for State Pension cannot support withholding tax currently. 

The allowance will apply across the UK, including Scotland. However, it introduces another layer of complexity to the tax system and creates a new income tax cliff edge. Perhaps a better solution would be to address the fiscal drag of the personal allowance or invest in upgrading State Pension systems so they can withhold tax.

Tax increase on property income and savings income

The tax rate for property and savings income will increase by an additional two percent. The measure is expected to raise an additional £1bn by 2028/29. The 2025 Budget had already announced a two percent increase, which was due to become effective from April 2027, so this is an additional increase beyond that.

The changes are:

• Increase the savings basic rate to 24%, the higher rate to 44% and the additional rate to 49% from 6 April 2027. 
• Increase the property basic rate to 24%, the higher rate to 42% and the additional rate to 49% from 6 April 2027. 

The Scottish Government can only set income tax rates and bands on non-savings non-dividend income so these changes to savings rates will apply in Scotland.

Property income is devolved to Scotland, so these changes will not apply here. Landlords in Scotland will therefore not be affected by the increase to property income. However, it may put pressure on the Scottish Government to make similar changes in the Scottish Budget as the increase in property income rates for taxpayers in the rest of the UK means that Scottish funding will be reduced through block grant adjustment.

Effectively, the mechanism adjusts for the income that would've been raised if the higher property income tax rates had applied in Scotland. If the Scottish Government does not raise its rates, Scotland will see a negative impact to its funding.

Let us know your views  

If you want to have your say, please contact our Tax team with your thoughts.