Scottish Budget: Key Highlights, Implications for Businesses and Key Industry Comments – Scottish Business News

The Scottish Government has unveiled its budget for 2025-2026, with Finance Secretary Shona Robison outlining a comprehensive plan aimed at addressing economic challenges while fostering growth and social equity. The budget emphasizes investments in public services, economic development, and measures to combat climate change, reflecting Scotland’s commitment to sustainable growth and social welfare.

Economic and Social Investments

A significant highlight of the budget is the allocation of £2 billion for the NHS, focusing on reducing waiting times and improving access to healthcare services. Additionally, £768 million has been earmarked for affordable housing projects, aiming to tackle housing shortages and provide more Scots with secure homes.The budget also includes a substantial increase in social security spending by £800 million, underscoring the government’s commitment to reducing child poverty. This includes plans to eliminate the two-child benefit cap, which is expected to lift 15,000 children out of poverty.

Tax Adjustments

In terms of taxation, the Scottish Government has decided not to introduce new income tax bands or alter existing rates. However, it has adjusted the starter and basic rate thresholds, providing some relief for low- and middle-income earners. The Additional Dwellings rate under the Land and Buildings Transaction Tax (LBTT) will increase from 6% to 8%, effective from December 5, 2024.

Support for Business and Innovation

The budget outlines a £321 million investment in Scotland’s enterprise agencies to support emerging technologies such as AI and robotics. This investment aims to bolster Scotland’s position as a leader in tech innovation and create new job opportunities.Further support for education is evident with over £2 billion allocated to colleges and universities, ensuring these institutions remain competitive with counterparts across the UK while maintaining free tuition.

Climate Action and Infrastructure

Reflecting a strong focus on climate action, the budget dedicates £4.9 billion towards positive climate initiatives. This includes investments in infrastructure projects that are critical for long-term economic growth, with capital spending set to exceed £7 billion.

This budget represents a strategic effort by the Scottish Government to balance immediate economic pressures with long-term goals for sustainable development and social justice. By investing heavily in public services, education, and climate action, Scotland aims to create a resilient economy that benefits all its citizens. As these measures unfold, businesses and communities will be keenly observing their impact on Scotland’s economic landscape.

Comments from the Industry and more:

Scottish Conservative North East MSP and shadow secretary for net zero and energy, Douglas Lumsden, said: “The SNP’s budget is a damp squib for the North East.

“We still have no Energy Strategy and no Just Transition Plan, nor the support for the workforce both of them need.

“The much trumpeted £500m Just Transition Fund for North East and Moray sees its annual allocation at a paltry £15.9m next year. It will take decades to stump this up at the current rate.

“And of course, it comes after the shameful abandonment last year of the £80m Carbon Capture Fund, with no sign of it next year either.

“Thousands of jobs across the North East are being lost while this devolved government defers, dithers and delays.

“The SNP government must deliver a just transition or admit it was another empty promise to the North East of Scotland.”

Susan Love, Strategic Engagement Lead for Scotland, ACCA said: “Following the difficult decisions announced in the Chancellor’s October budget, no one expected today’s Scottish budget announcement to be anything other than challenging, despite the additional £3.4bn of Barnett consequentials. 

“Overall, the Scottish budget announcement recognised the concerns from the business community, providing some measure of certainty on future tax plans, while setting out a clear priority for spending focused on alleviating child poverty.”  

Speaking of businesses, Love added: “Businesses in Scotland fighting to attract talented professionals to Scotland will be relieved to see a pause in further divergence with the rest of the UK on income tax, and a commitment to maintain current bands for the duration of the Scottish parliament. 

“While fiscal drag has remained in place for some taxpayers, those on the basic and intermediate rates will see a 3% threshold increase which offers a welcome boost to pay packets of lower earners.”  

Scottish Conservative North East MSP Liam Kerr said: “The adoption of rates cuts is well overdue for the hospitality industry, which has long been the victim of SNP policies.

“But ignoring the needs of shops and leisure facilities is a major mistake which threatens the future of our high streets.

“This was a chance for the SNP to also put Scotland’s retail and leisure sectors on a level footing with England and to show Aberdeen is fully open for businesses.

“Instead, they have turned their backs on a fundamental part of our city centre, at a time when traders are already suffering at the hands of bus gates and LEZs.”

Kirsty Morrison, Group CEO of Albyn Housing Society said:

“If we are to satisfy current housing need in the Highlands then there will need to be considerably more homes built. To keep up with future housing demand created by a successful Inverness and Cromarty Firth Green Freeport, it is estimated that we will need 24,000 homes over the next ten years.

“If we are to realise the benefits of this economic transformation then there will need to be a considerable increase in the number of affordable and private homes built in the area. The Finance Secretary’s restoration of the housing budget is a key part of unlocking current and future developments. This is especially important for rural areas like the Highlands where construction costs tend to be higher”

Commenting, CEO of the SBPA Emma McClarkin said:

“The support on Business Rates announced today by the Scottish Government is greatly welcomed by our sector and much-needed.

“It is still an uphill challenge for the sector with not every pub receiving the support, as well as the proposed increase in National Insurance Contributions disproportionately impacting hospitality businesses, adding on an average £4,700 in costs to each pub operating across the country.

“However, the 40% relief announced today will hopefully mean fewer closures over the next year and give the sector some added confidence moving forward.

“Scotland’s pubs have been hit with a perfect storm of increasing costs and headwinds such as a growing regulatory burden and inflationary pressures which have combined to see net income for the average pub drop by 54% since 2019, and net margin drop from 8.5% to 3%.

“The lack of support on rates in previous years created a situation where pubs in Scotland were closing at twice the rate of those in England and support on this was our number one ask in our budget submission – we’re delighted they’ve listened to our calls.”

Susan Jackson, Joint Managing Director at Campion Homes, said:

“The cut to funding for affordable homes last year definitely had a significant negative impact on several social housing projects. Ultimately, this has led to delays in families being able to move into the homes they need. 

“With several Councils and the Scottish Government both declaring housing emergencies, clearly this needed to be addressed. That is why it is really positive to see this budget cut reversed. Significant barriers to more homes, both private and social, still remain, but this is a good step towards recovering the shortfall of 110,000 homes in Scotland since 2007.”

Energy Industries Council Statement on Scottish Budget 2024-2025

A more integrated and holistic approach to safeguarding the overall energy industry would yield greater benefits for Scotland’s energy future. With a significant pipeline of projects expected to come online in the 2030s, it is crucial that government support ensures smoother, faster permitting processes, strengthens the readiness of ports, vessels, and turbine manufacturers, and encourages partnerships between developers and the supply chain. Targeted incentives will attract investment and enable the supply chain to meet these ambitious goals. Finally, a modernised and expanded grid is essential to unlock the full potential of Scotland’s renewable energy ambitions. The EIC is committed to working with the government and industry to make this vision a reality.

Graham Howarth, Partner at property consultancy Gerald Eve, commented:

“The Finance Secretary’s business rates announcements today in the Scottish Budget have provided a small amount of festive cheer for certain sectors of Scottish Businesses but for others there remains little or no assistance.

Small Uniform Business Rate

“Although we welcome the announcement by the Minister to continue the freezing of the small basic uniform business rate for the seventh consecutive year, with the Scottish Government’s policy to exempt over 100,000 of properties from payment of rates they will continue to contribute nothing to Scottish tax coffers, while others will contribute very little.

“The announcement is a further blow to Scotland’s medium and large companies, who comprise less than 9% of all Scotland’s non-domestic properties but will now contribute almost 75% of the business rates tax bill to the Scottish Government.

Large business supplement

“We despair at the continued incredulous position of the Scottish Government to maintain the large business supplement, despite it being a manifesto policy in the previous and current parliamentary term to remove this. Scottish properties with a rateable value more than £100,000 will continue to pay a supplement that is 1.4p per £1 of Rateable Value higher than the equivalent properties in England, meaning that Scottish-based large properties pay some of the highest property-based taxes in the UK, at a time when the Scottish Government is seeking growth, stability, and transformation of the Scottish economy. This will cost Scottish companies an extra £60 million compared with their counterparts based south of the border.

“Even more ludicrous is that over 25% of the properties caught in this policy are properties funded by the Scottish Government through general taxation. At a time when local authorities are under extreme pressure to cut costs and generate revenue, this added burden on already stretched budgets continues to be farcical. This will cost taxpayer funded properties an extra £15m in 2025/2026.

Retail, Leisure and Hospitality

“Certain sectors of the Retail, Leisure, and Hospitality sectors have today raised a glass of cheer to the Scottish Government, which has provided them with additional support through the re-introduction of relief at 40% – matching the equivalent provided to properties in England. However, as ever, the devil is in the detail and this relief is being capped at £110,000 per business to properties with a rateable value of less than £51,000 only. This means there will be no relief available for large multi-property organisations in these sectors, putting them at a disadvantage to their counterparts in England where 40% relief has been applied to all businesses but capped at £110,000 relief.

“This is a bitter pill for the sector, which is already struggling with the increase in National Insurance announced in the Westminster budget and putting businesses at breaking point. Although the announcement has been sugar coated, the fine print is what needs to be looked at and sadly this does not provide the additional support that was desired by businesses. We are also surprised that the Scottish Government has not followed suit with Rachel Reeves’ Budget announcement last month of the intention to introduce lower uniform business rate multipliers for qualifying retail, leisure, and hospitality from 2026/27.”  

Fiona Hodgson, Chief Executive of SNIPEF, said: “The allocation of £768 million to deliver 8,000 low and middle-income homes is a positive step forward and will undoubtedly drive demand for plumbing and heating professionals.

“Likewise, the £300 million investment to improve heating and insulation as part of the effort to tackle fuel poverty, alongside £25 million for new green energy jobs, which we hope will include apprenticeships, demonstrates a commendable commitment to achieving Scotland’s climate goals.”

However, Hodgson cautioned that these initiatives could falter without urgent action to address the profession’s skills gap: “Our latest State of Trade survey reveals that 65% of plumbing and heating businesses are struggling to find skilled professionals in their area. Without investment in training and upskilling, the plumbing and heating profession cannot deliver the housing and green energy projects Scotland urgently needs. Heat pumps and other renewable technologies, for example, require a skilled workforce, and this cannot be achieved without meaningful investment in further education.”

SNIPEF also acknowledged measures to support small businesses, including continuing the Small Business Bonus Scheme and a freeze on property rates for business premises. Hodgson welcomed these steps, noting that many plumbing and heating businesses will benefit: “Support for small businesses is always welcome, particularly in a challenging environment where many are grappling with staffing shortages, high energy costs, and rising material prices. However, without addressing the skills gap, the full potential of these investments cannot be realised.”

SNIPEF is calling on the Scottish Government to:

• Announce greater investment in further education and vocational training: Allocate resources to support apprenticeships and specialist training in the plumbing and heating profession.
• Tackle the skills shortage: Implement strategies to attract new talent and upskill the existing workforce to meet the demands of a green economy.
• Collaborate with industry stakeholders: Engage with organisations like SNIPEF to develop policies that ensure the success of housing and green energy initiatives.

“Our members are ready and willing to contribute to Scotland’s housing goals and climate ambitions,” Hodgson concluded. “But these projects will only succeed if we invest in the people who will deliver them. The plumbing and heating profession is central to these efforts, and we urge the government to prioritise skills funding to ensure its success.”

Catherine McWilliam, National Director of IoD Scotland said: “When we asked members how they felt ahead of the Scottish Budget this year, 0% said they felt positive, while 81% were very or quite pessimistic. Today’s announcement is unlikely to have increased business confidence, however, it may have allowed for cautious optimism.

“SMEs make up the majority of Scotland’s business community and are the backbone of our economy, so today’s commitment to the regeneration of town centres is very welcome. This will have a positive effect both directly and indirectly across the country, as local investment will stimulate growth, job creation and entrepreneurship.

“Leaders based in rural parts of the country will also be encouraged by today’s budget and the promise of improved connectivity, through digital and physical infrastructure, as well as the continuation of the small business bonus scheme.

“While not every box in our budget submission was ticked, we look forward to continuing dialogue with the Government to ensure the needs of our members right across Scotland are being met.”

Joao Sousa, Deputy Director of the Fraser of Allander Institute, said: “This was a Budget with an eye on the election, but storing up risks. And crucially, what was left unsaid was just as consequential as what Shona Robison mentioned in her speech.

“The Scottish Government will be hoping many of the headlines will focus on the measure with most political impact – the promise to mitigate ‘as far as possible’ the impacts of the two-child limit. This was clearly a late addition, and one which has not been included in their own or the Scottish Fiscal Commission’s analysis – though it might cost as much as £200m a year. The Scottish Government will be hoping this is brought in UK-wide before they have to fund it – a heavily caveated 2026 was mooted as the start date, but it can take the moral high ground in the meantime.

“There were also announcements of growth in health spending and the affordable housing budget, although as we have said frequently, how and where the money is spent is just as important.

“There was also an announcement of non-domestic rates relief for the hospitality industry, which may seem the same as that announced in England at first glance, but is actually much narrower. It only applies to the smallest premises – many of which will get full relief anyway – and retail and leisure premises are excluded. And ScotWind monies will be called upon less than previously pencilled in, although some of the usage will still be for day-to-day spending – not exactly “the kind of long-term investment it should be spent on” that the Finance Secretary espoused.

“But the most surprising decision was to not account for the shortfall increase in employment costs due to the increase in employer National Insurance Contributions, and which we only learned from the Scottish Fiscal Commission’s documents. This is a significant and certain permanently higher cost that will come in on 1 April, setting up a possible need for further emergency measures during the course of the next financial year – leaving us wondering whether any lessons have been learned from going into a new year without fully setting aside budget cover for what are known costs, as highlighted by the recent Audit Scotland report.”

Creative Scotland’s Chair, Robert Wilson, said: 

“Today’s draft budget announcement by the Scottish Government is enormously welcome. The major boost to Multi-Year Funding and other activities opens up wider opportunities, and we are grateful to the Scottish Government for this significant vote of confidence in Creative Scotland and the creative and culture sector. 

“This is especially positive in the light of the long-term financial challenges the sector has been dealing with and will enable people and organisations to once again look forward with more confidence.” 

Myrtle Dawes, chief executive of the Net Zero Technology Centre, said:
“We welcome this government investment in Scotland’s burgeoning offshore wind sector, and commend Finance Secretary Shona Robison’s commitment to attracting private sector capital.
“For decades, Aberdeen and the north-east have been at the forefront of energy innovation, with talent, technology and wind power in abundance. Scotland has the necessary ingredients to become the net zero capital of Europe.”

Tax Partner Alan Stewart and Partner Euan Fernie, from MHA

Euan said: “At times, this budget felt like a case of being blinded by figures with the finance secretary flitting back and forth between savings and absolutes. More detail will emerge, however, there is a need for clarification on what was new funding and what has previously been announced.   

“From a personal tax point of view, the low-level tax band expansion allows the Scottish Government to continue saying the majority of taxpayers in Scotland pay less tax than in England albeit by a small amount, while the rest pay substantially more than our English counterparts.   

“While talking about agriculture and the previous years’ funding that had been retained, it was not clarified whether this year’s funding would be ring-fenced, something that was suggested recently by Chancellor Rachel Reeves would not be the case. In theory, the Scottish Government could spend it on whatever they want, they don’t have to spend it on the farming community, however, that may come out in the detail. Hopefully the Scottish Government will continue to support Scottish farming to the fullest extent possible.” 

Aberdeen was hailed by Robison as ‘perfectly placed to become a global hub for green energy’.  

Alan added: “What that means, we don’t yet fully know. There was no mention of extra money being directly spent on the North-east and the area is already regarded as a hub as the oil and servicing industry is here. There was however welcome news that investment in offshore wind will be increasing to £150 million which will help this energy sector. 

“Elsewhere, the hospitality industry will take relief from the non-domestic rate position. There did not appear to be direct mention of this for the retail sector, however.”  

Euan Fernie is Partner at MHA, based in Edinburgh. He joined accountancy firm Geoghegans in 1999 and became partner six months later. Earlier this year, Geoghegans, which is based at St Colme Street, Edinburgh, merged with MHA.  

Alan Stewart is tax partner at MHA, based at its office in Carden Place, Aberdeen. He has worked with clients operating in a host of industry sectors and has gained detailed experience in dealing with commercial issues faced by clients of all sizes. Alan provides tax advisory services to a broad range of clients including individuals, companies and owner managed businesses. 

Martin Bell, tax partner at BDO in Scotland: “Since income tax was devolved in 2017, we’ve had more complexity in Scotland and a growing divergence between Scottish taxpayers and the rest of the UK. Businesses consistently tell us they struggle to attract top talent as Scotland is perceived as the “high tax” part of the UK because of the income tax differential between Scottish and the rest of UK taxpayers other than at relatively low-income levels. 

“Businesses will welcome today’s confirmation to not increase the rates of Scottish income tax or introduce any new tax bands for the remainder of this Parliament as they seek certainty and simplification above all, albeit the Parliament has a short remaining life and so that statement has limited real impact.

“The rises in national minimum wage and employers’ National Insurance Contributions (NIC) in the UK Budget has increased Scottish employer costs and may impact pay increases and long-term job creation. Today, it was confirmed that basic and intermediate rate thresholds will increase by 3.5% this year which is yet another change with a relatively small real impact. 

“The ambition to fund a “green reindustrialisation of Scotland” is an interesting and positive statement. We’ve seen a strong M&A market for circular economy businesses in Scotland and significant public sector investment in and around a long-term green strategy may boost this further.”