Scottish Aggregates Tax rate policy for 2026-2027: island communities impact assessment

2. Policy aims

The decision to align the SAT rate with the UK Aggregates Levy 2026-27 rate has been informed by the evidence base – such as a recently commissioned ClimateXChange research project relating to SAT. The study investigates the availability of alternatives to primary aggregates and analyses barriers to their uptake. Ricardo consultancy services were contracted to carry out the research, which explores the potential for alternatives to primary aggregates to reduce greenhouse gas emissions. The final research report was published on 25 June 2025. One of the key findings of the report is that there is a lack of Scotland-specific data on volumes of alternatives to primary aggregates. This limited evidence base means that is not possible to assess in detail the specific impacts of e.g. a higher rate of SAT relative to the UK.

Tax rate alignment in 2026-27, and the timing of the announcement, is considered necessary to reach a formal agreement with the UK Government on the approach to the setting of the Block Grant Adjustment baseline for SAT and, with that, on the planned 1 April 2026 introduction date. This approach will allow the baseline to be finalised based on actual year 1 devolved tax revenue, protecting Scotland’s net revenue position in the immediate term.

Following the conclusion of the SAT primary legislation, officials have met with several stakeholder groups to gain their views on the future tax rate as this was a key issue during the parliamentary scrutiny of the Act. Engagement has taken place with aggregates industry bodies and individual businesses, recycling sector bodies, COSLA and tax professional bodies. These discussions indicate that there is a strong case for taking a decision on the initial tax rate for SAT in advance of Scottish Budget 2026-27 and for alignment with UK Aggregates Levy (UKAL) rate in the first year of tax introduction. In summary, this would provide certainty for taxpayers and enable businesses to prepare for SAT implementation.

The Scottish Government intends that SAT will align with wider ambitions to deliver a fair, green and growing economy; in particular, the Scottish Government’s ambitions for a circular economy.

The Scottish Government publication, Delivering Scotland's circular economy - route map to 2025 and beyond, sets out the importance of embedding circular construction practices to reduce resource needs, reduce waste and carbon, and encourage refurbishment and reuse. SAT will support the Scottish Government’s ambitions for a circular economy, in particular the ambition to embed circular construction practices. Although SAT in and of itself will not individually deliver the Scottish Government’s circular economy ambitions, it will serve as a price signal which complements other circular construction measures.

Recognising the environmental impacts associated with the use of new materials, the Act will support the Scottish Government’s circular economy and zero waste goals and continue to encourage a shift in demand from primary aggregate towards recycled aggregate, wastes and other by-products. The Act will also encourage innovation and the development of new products which might substitute for aggregates in future and help to support this shift.