Scottish Budget 2026 to 2027: Scottish tax ready reckoners
This note presents a set of ready reckoners which show the estimated revenue impact of illustrative changes to Scottish tax policy in 2026-27, including Income Tax, Land and Buildings Transaction Tax (LBTT) and Non-Domestic Rates (NDR), relative to the policies announced for 2026-27.
Non-Domestic Rates
Non-Domestic Rates (NDR), sometimes referred to as business rates, are a form of property tax paid by businesses, charities, and public sector organisations, which help pay for local services. The amount of NDR paid is determined by applying the relevant tax rate to a property’s rateable value (RV), less any reliefs that have been awarded. The Scottish Government is responsible for setting NDR policy, whilst local councils are responsible for the administration of NDR.
The NDR ready reckoners provide an order of magnitude estimate of NDR revenue that could hypothetically be raised in addition to existing policy for 2026-2027, by varying key policies of the NDR tax system: the Basic Property Rate (BPR, often referred to as poundage), the Intermediate Property Rate (IPR), and the Higher Property Rate (HPR). Tax rates cannot be amended in-year.
As set out in Table 5, there are around 260,000 non-domestic properties that are liable to pay NDR, although properties that receive a relief will receive a reduced or nil net NDR liability[8]. Any changes to the Basic Property Rate (poundage) would change the gross NDR bills (before reliefs) for around 236,200 properties with RV up to and including £51,000. The Intermediate Property Rate is applied to around 10,800 properties, and the Higher Property Rate is applied to around 12,600 properties.
| Band of Rateable Value | Rate | Number and proportion of NDR properties |
|---|---|---|
| RV up to £51,000 | 48.1p | 236,200 (91%) |
| RV over £51,000 and up to £100,000 | 53.5p | 10,800 (4%) |
| RV over £100,000 | 54.8p | 12,600 (5%) |
The NDR ready reckoners in Table 1 relate to the Contributable Amount of NDR, which is forecast by the SFC. The Contributable Amount is the revenue collected by local councils and transferred to the Scottish Government. The Contributable Amount is notionally pooled in the NDR rating account and is then redistributed to councils as the Distributable Amount, as part of the Local Government Finance Settlement. The Distributable Amount is set in the Budget and remains unchanged during the financial year. Differences between the Distributable and Contributable Amounts are managed through the Non-Domestic Rating Account (the 'NDR pool')[9].
Table 1 shows the additional benefit to the Scottish Budget of increases to NDR tax rates:
- A 1p increase to the Basic Property Rate (or poundage) would increase NDR revenues by around £13m in 2026-2027.
- A 1p increase to the IPR would increase NDR revenues by around £7m in 2026-2027.
- A 1p increase to the HPR would increase NDR revenues by around £49m in 2026-2027.
The Basic, Intermediate, and Higher Rates are separate rates that do not affect each other. For example, increasing the BPR by 1p would not change the amount paid by ratepayers liable for IPR or HPR.
Any combination of NDR policies in Table 1 can be broadly estimated by summing the impact of each individual change. For example, a policy which adds 1p to the Basic, Intermediate, and Higher Property Rates would raise around £69 million. The estimates for rate changes can also be scaled up or down to some extent, in that a 0.5p rise in any rate would raise half as much as a 1p increase. In addition, for any rate change, the impacts of rate increases and rate cuts are also broadly symmetric, so that a 1p cut in the Basic Property Rate would reduce revenue by around £13 million.
Areas of uncertainty
The main area of uncertainty relates to the changes to the tax base due to occur as a result of the 01 April 2026 revaluation, and assumptions made with respect to revaluation proposals and appeals following that revaluation. Once resolved, a successful revaluation proposal or appeal will have the effect of reducing total RV and therefore NDR revenues, as ratepayers are re-billed on the basis of a lower RV for their property.[10] Individual additions and deletions of properties subject to NDR will also affect total RV and revenue, which is subject to some in-year uncertainty.
A further area of uncertainty relates to new NDR policies that will be introduced on 01 April 2026. These include a general Transitional Relief, and specific Transitional Reliefs for small businesses, rural properties and businesses operating in the hospitality industry, and a relief for properties in the Retail, Hospitality, and Leisure sectors. The effect of a change in Basic Property Rate, Intermediate Property Rate, or Higher Property Rate on these policies does not scale in a linear or symmetric fashion.