Scottish budget raises tax thresholds and offers modest cuts for lowest earners

The Scottish government raised income tax thresholds, providing a small tax cut for the lowest earners while funding the package through reserves, spending cuts and increased borrowing ahead of May's Holyrood election.

Ministers in Scotland announced a budget that raises income tax thresholds and includes targeted spending changes ahead of the May Holyrood election. The package delivers a modest tax cut for the lowest earners and increases some welfare and capital commitments while using reserves, spending reductions and borrowing to pay for new measures. The government framed the changes as cost-of-living support and economic priorities for Scotland. Opposition parties, independent thinktanks and fiscal watchdogs criticised the package as limited and reliant on short-term funding choices. Budget specifics: - Income tax thresholds were raised by 7.4%, cutting taxes for the lowest earners by around £11 a year and, according to ministers, meaning 55% of taxpayers will take home up to £40 a year more than if they lived elsewhere in the UK from April. - The measures are expected to cost about £50m in the next financial year and are being funded in part by using reserves, cutting day-to-day spending and increasing borrowing, according to the finance secretary's announcements. - Child payment for the poorest families was announced to rise to £40 a week for children under one from 2027; college funding is set to increase by 10%; social housing spending was increased by £34m to deliver about 36,000 homes, short of the 2032 target. - New taxes or higher rates were proposed for private jets (higher air passenger duty from 2028) and additional council tax on houses worth over £1m from 2028; thresholds for higher income tax rates will be frozen from April for three years. - Independent bodies raised concerns: the Institute for Fiscal Studies and the Scottish Fiscal Commission warned the announced increases for health and social care may be insufficient and that the budget relies on planned workforce cuts and efficiency savings; other analysts said the package uses one-off funds and hides some key figures in annexes. Summary: The budget introduces modest tax reliefs for lower earners and several targeted spending changes while relying on reserves, spending cuts and borrowing to balance new pledges. Critics from opposition parties and independent institutes described the package as limited or short-term, and the fiscal watchdogs said the plans leave questions about future public services and funding. The measures largely take effect from April and will be discussed during the run-up to the May Holyrood election.