The 2024 Scottish Budget, unveiled on December 4, focuses on significant investments in public services, social security, and tax policies designed to promote fairness and support for households. The budget delivers record levels of funding for the NHS and local councils, alongside a commitment to increased spending on public services. Compared to the current year’s Autumn Budget Revision, spending is set to rise by 5.3% in cash terms, or 2.9% when adjusted for inflation, by 2025-26.
In terms of social security, the government has confirmed the introduction of a £100 winter fuel payment for pensioner households who will no longer qualify for the more generous means-tested payments of £200 or £300. This new payment will begin in winter 2025-26, costing £67 million next year and rising to £78 million by 2029-30. Additionally, the government aims to effectively abolish the two-child limit on universal credit, which caps per-child payments at the level allowed for families with two children. This change, set to take effect from 2026-27, is expected to cost £250 million annually.
On tax policy, the Scottish Government plans to increase the starter and basic rate income tax thresholds by 3.5%, costing £24 million in 2025-26, and has committed to uprate these thresholds by at least inflation for the remainder of the parliamentary term. However, the higher, advanced, and top-rate thresholds will remain frozen, generating £71 million in additional revenue next year, with this figure rising to £223 million by 2026-27. The government has also reiterated its intention not to increase income tax rates or introduce new tax bands, maintaining the current structure of six income tax bands.
The proposed income tax rates for 2025-26 range from 19% for the starter rate band (£12,571 to £15,397) to 48% for earnings above £125,140, with additional reductions in the personal allowance for individuals earning over £100,000.
| Scottish Income Tax Policy Proposals 2025-26 | ||
| Band | Income Range | Rate |
| Starter rate | £12,571* – £15,397 | 19% |
| Basic rate | £15,398 – £27,491 | 20% |
| Intermediate rate | £27,492 – £43,662 | 21% |
| Higher rate | £43,663 – £75,000 | 42% |
| Advanced rate | £75,001 – £125,140 | 45% |
| Top rate** | Above £125,140 | 48% |
Major Changes Impacting Property Investment
The 2024 Scottish Budget also introduces significant policy shifts that are expected to reshape the property investment landscape in Scotland. Key measures include a substantial increase in the Additional Dwelling Supplement (ADS) and renewed funding commitments to affordable housing, aimed at tackling the country’s housing challenges.
Higher ADS Rate to Impact Landlords
The Budget increases the ADS from 6% to 8%, effective December 5, 2024. This tax applies to the purchase of additional residential properties valued at over £40,000, including buy-to-let investments and second homes. The increase is forecast to generate an additional £32 million in revenue for 2025-26 and aims to support first-time buyers by reducing competition for properties. It does appear, however, that Multiple Dwellings Relief is to be retained in Scotland, despite not being available elsewhere in the UK.
Despite these goals, the measure is expected to place additional financial pressure on landlords, potentially discouraging investment in Scotland’s private rental market. Many in the sector believe the higher ADS rate may exacerbate existing challenges, including a shortage of rental properties and increasing demand in the housing market. Some analysts predict that landlords may pass these costs onto tenants, contributing to rising rental prices and reduced affordability.
Balancing Market Pressures and Social Needs
The dual approach of raising taxes on property investment while increasing funding for affordable housing reflects a balancing act between market regulation and social priorities. However, these measures may not fully address Scotland’s housing challenges in the short term. The increased tax burden on landlords, coupled with planned rent control measures and impending energy efficiency regulations, could lead to a contraction in the private rental sector. This would place additional pressure on an already strained housing system.
Affordable housing investment, while vital, will take time to yield tangible benefits. In the meantime, housing demand continues to outstrip supply, leaving many households struggling to secure adequate accommodations.
Renewed Commitment to Affordable Housing
In a welcome reversal, the Scottish Government has restored funding to its Affordable Housing Supply Programme, following a controversial £200 million cut to the budget last year. The 2024 Budget allocates £768 million for the delivery of over 8,000 new affordable homes across social rent, mid-market rent, and low-cost ownership categories.
This investment is part of a broader strategy to address Scotland’s housing crisis, which includes tackling child homelessness and alleviating poverty. By increasing the stock of affordable housing, the government aims to reduce reliance on temporary accommodations and provide stable, long-term housing options for vulnerable populations.
Future Outlook
The 2024 Scottish Budget marks a turning point for the nation’s housing policy, signalling a commitment to long-term investment in affordable housing while introducing measures that could reshape the dynamics of property investment. Landlords and investors are urged to reassess their strategies in light of the changes, as the higher ADS rate and other market interventions may affect profitability and demand.
As the housing sector adapts to these developments, the focus will remain on how effectively the government can implement its policies to deliver lasting solutions to Scotland’s housing challenges. The interplay of higher taxes, increased regulation, and affordable housing investment will likely shape the housing market for years to come.