Scotland Act 2016 implementation: tenth annual report

2. Fully Devolved Taxes

The Scotland Act 2016 provided for the devolution of powers to introduce a tax charged on the carriage of passengers by air from airports in Scotland and on the commercial exploitation of aggregates in Scotland. Scottish Aggregates Tax was introduced on 1 April 2026. Air Departure Tax is set for introduction in 2027/28.

Costs

10. Consistent with the approach taken for previous reports, the figures in Table 2.1 above relate only to Revenue Scotland. For this report, the 2025-26 figure relates solely to costs incurred in work to prepare for the introduction of Scottish Aggregates Tax.

Scottish Aggregates Tax

The Scotland Act 2016 provided the Scottish Parliament with the devolved competence to legislate for the introduction of Scottish Aggregates Tax (SAT). From 1 April 2026, SAT replaced the UK Aggregates Levy (AGL) in Scotland.

SAT applies to the commercial exploitation of primary aggregates (crushed rock, sand and gravel) in Scotland.

2025-26 Developments

11. During 2025-26 the Scottish Government consulted on and introduced a range of secondary legislation required to ensure the successful introduction of SAT. This included administration regulations, which make provision for the administration and assurance of SAT, alongside required changes to the Revenue Scotland and Tax Powers Act 2014 regulations to ensure that SAT is operationally effective and aligned with the wider legislative framework for devolved taxes.

12. Further regulations were introduced to make provision for the taxation of cross-border movements of aggregate to prevent double taxation, minimise market distortion and support a smooth transition from AGL to SAT in Scotland.

13. Regulations were also laid to set the SAT tax rate for 2026-27, and a commencement instrument was introduced to activate the remaining provisions in the Aggregates Tax and Devolved Taxes Administration (Scotland) Act 2024.

14. In parallel, regulations laid by His Majesty’s Treasury (HMT) in the UK Parliament formally disapplied the AGL regime in Scotland from 1 April 2026.

15. Scottish and UK Government officials worked closely together to agree the block grant adjustment (BGA) arrangements for SAT. Policy alignment with AGL in Year 1 (2026-27) enabled agreement of a bespoke approach to the SAT BGA baseline, reducing the risk to the Scottish Budget by avoiding distortions in Year 1 revenues. As outturn data disaggregated at a country level is not available for the year prior to devolution (2025-26), Scottish and UK Ministers agreed that the SAT BGA baseline should be based on Year 1 (2026-27) revenues, with a reconciliation in future years to allow for this. The BGA baseline methodology was confirmed at a meeting of the Joint Exchequer Committee on 17 October 2025.

Future plans

16. Over time, the devolved administration of SAT will build better sector knowledge and improve data quality for the Scottish Government and Revenue Scotland. This strengthened evidence base will support the development of future SAT policy.

Air Departure Tax

17. The Scotland Act 2016 provided the Scottish Parliament with the devolved competency to legislate for the introduction of a tax charged on the carriage of passengers by air from airports in Scotland. Once commenced, the Air Departure Tax (Scotland) Act 2017 will exercise this competency.

18. The implementation of Air Departure Tax (ADT) had previously been deferred due to issues raised in relation to an existing exemption within Air Passenger Duty (APD) for flights departing from the Highlands and Islands.

2025-26 Developments

19. At the 2026-27 Scottish Budget, the Scottish Government announced that ADT will become operational from 1 April 2027. From that date, the existing UK-wide APD will cease to apply to the carriage of passengers by air from Scottish airports.

20. On 29 January 2026, the Scottish Government launched a consultation seeking views and evidence on the implementation of ADT, including on the Scottish Government’s proposed Highlands and Islands exemption. The Scottish Government will carefully consider all responses to the public consultation prior to finalising decisions on secondary legislation to deliver ADT from 1 April 2027.

Future plans

21. The necessary secondary legislation will be considered by the Scottish Parliament. If approved, the introduction of ADT will occur on 1 April 2027.

22. The UK Parliament will be required to utilise provisions of the 2016 Act which will disapply the existing APD regime in Scotland from 1 April 2027. The UK and Scottish Governments are working closely together to agree the BGA arrangements for the tax, in line with the Fiscal Framework agreement.

23. Revenue Scotland, Scotland's tax authority for devolved taxes, will be responsible for the collection and management of ADT when introduced. A programme of activity to deliver the systems, processes and other requirements for ADT is underway.

24. The Scottish Government continues to engage closely with the aviation sector and other stakeholders. Discussions are also ongoing between the Scottish Government, Revenue Scotland and His Majesty’s Revenue and Customs (HMRC) to ensure that the administrative arrangements for ADT and APD work effectively together.

25. Once ADT has been introduced, the Scottish Fiscal Commission (SFC) will forecast the ADT revenues to be applied to the Scottish Budget.