Scottish Budget 2025-26 Key Headlines to Non-Domestic Rates Measures and Tourism Policies

Introduction

· The Scottish Government have published their initial tax and spending plans for 2025-26.1 Setting out the draft plans, the Cabinet Secretary for Finance Shona Robison said it that despite challenging circumstances, it was “a Budget filled with hope for Scotland’s future” one that delivered on priorities.

· However, the recent UK Budget did improve the fiscal position in Scotland, with £3.4bn heading north, covering 2025-6. Nonetheless, there is still a squeeze on funds, thanks largely to increases to public sector salaries in a sector that is larger per head than elsewhere in the UK – and Robison also blamed the added pressure due to increased employer National Insurance contributions.

· The measures announced will be accompanied by a Budget Bill which will later be put to a vote of MSPs, with the SNP Scottish Government requiring their plans to be backed by an opposition party.

Key Headlines

· Taxation: Income tax rates will be frozen until 2026. However, basic and intermediate rate thresholds to increase this year by 3.5%. to £15,397 and £27,491 respectively; and the Higher, Advanced and Top rate thresholds will be maintained at £43,662, £75,000 and £125,140 respectively.

· NHS: Record investment of £21bn to cut waiting times and making it easier for people to see their GP.

· Poverty: ending the two-child cap on benefits (although this might not come in until 2026) which could raise 15,000 children out of poverty, as well as funding for universal winter heating payments for older Scots.

· Local Government: £15bn was provided for councils and there will be no cap on council tax rises (ditching its once flagship policy).

· Environment and climate change: there was a clear pitch to the Scottish Greens, with £4.9bn earmarked for climate policies. More than £300m of ScotWind revenues will be invested in jobs and in measures to meet the climate challenge.

· Housing: there’s £768m for more affordable homes, although this promise largely undoes a previous cut from the Scottish Government.

· Education: a real-terms uplift of 3% for spending on education and skills.

· Business rates: maintain the Small Business Bonus Scheme and offer 40% non-domestic rates relief in 2025-26 for hospitality premises liable for the Basic Property Rate (with a rateable value up to and including £51,000), capped at £110,000 per business.

· Public health supplement: having committed to exploring the reintroduction of a Public Health Supplement for large retailers selling alcohol and tobacco in advance of this budget, “there are no plans to introduce this at this time.”

Key Non-Domestic Rates Measures Announced

The Scottish Government has announced a range of updates to non-domestic rates as part of the Scottish Budget 2025-26. These changes will impact businesses across the hospitality and self-catering sectors. Below are some of the key measures of interest:

Highlights:

• Freeze on Basic Property Rate: The poundage rate remains at 49.8p for 2025-26.
• Hospitality Relief Introduced: A new 40% relief for hospitality premises, including smaller music venues, capped at £110,000 per business.
• Island and Remote Area Relief Continues: 100% relief extended, now also covering music venues in specified areas.
• Support for Smaller Properties: Caps on rates increases under Small Business Transitional Relief and Revaluation Transitional Relief.
• COVID-19 Relief Closure: Applications for the Retail, Hospitality, and Leisure relief will close by 31 March 2025.

Read the full breakdown of measures below:

Non-Domestic Rates Measures in Detail

• The Basic Property Rate (poundage) will be frozen at 49.8p.
• The Intermediate and Higher Property Rates will increase by inflation to 55.4p and 56.8p respectively.
• A new 40% relief for Hospitality premises (including Music Venues with capacity up to 1,500) will be introduced for 2025-26, where the property is liable for the Basic Property Rate (rateable value up to £51,000), capped at £110,000 per business*
• The 100% relief for Hospitality premises on islands and specified remote areas will continue in 2025-26, capped at £110,000 per business, and will also be available for music venues with a capacity up to 1,500 per business from 1 April 2025.
• The Small Business Transitional Relief will, as announced in the 2023-24 budget, cap the increase in eligible properties’ rates bills at £1,800 for 2025-26, compared to 31 March 2023.
• As announced in Budget 2023-24, Revaluation Transitional Relief in 2025-26 will cap the annual increase in NDR liabilities (compared to 2024-25) due to the 2023 Revaluation at 37.5% for small properties (rateable value up to £20,000), 75% for those with rateable values between £20,001 and £100,000, and 112.5% for those with rateable values over £100,000.
• The Retail, Hospitality and Leisure relief previously available from 1 April 2020 to 30 June 2022 to mitigate financial hardship during the COVID-19 pandemic will close for applications on 31 March 2025.
• All other existing reliefs, including the Small Business Bonus Scheme relief, will be maintained as announced in previous Scottish Budgets.
• The Scottish Budget 2025-26 confirmed that the Scottish Government has no plans to introduce a Public Health Supplement at this time.
• From 1 April 2025, councils will be able to retain 50% of additional NDR revenue raised from their use of anti-avoidance powers under the Non-Domestic Rates (Miscellaneous Anti-Avoidance Measures) (Scotland) Regulations 2023.

*While the legislation will still be subject to passage through the Scottish Parliament early in 2025, we expect that the 40% hospitality relief for properties with rateable values up to £51,000, and capped at £110,000 per business, will cover the same property uses as the 100% islands and remote areas hospitality relief in place this year (and continued in 25-26), The Non-Domestic Rates (Islands and Remote Areas Hospitality Relief) (Scotland) Regulations 2024, but with the addition of music venues (with a capacity of up to 1,500). So we expect this will include self-catering properties.