Given this is an election year, there was a focus on shoring up support from a Government that looks likely to be re-elected as a minority administration again. Much of it was about shifting pots of money around, with the NHS and Social Care being notable winners in this and Local Government again seeing real spending cuts. Most of the difficult decisions, e.g. around significant funding shortfalls, identified by the Government itself in its Medium Term Financial Strategy, have been quietly put to one side as we are about to go on election footing.
For Housing in Scotland, there were a number of key announcements.
Higher levels of investment in affordable housing.
The Government has committed to investing £4.1 billion of public money in funding affordable housebuilding over the next four years, which is the type of multi-year funding commitment that the affordable housing sector has been wanting. There will be a 20% rise in the Affordable Housing Supply Programme (AHSP) in 2026-27 compared with the previous year. However, this funding still falls well short of what the affordable housing sector is asking for to ‘fix’ the housing emergency.
Introduction of a ‘mansion tax’.
As we stated in our recent start of the year review, we did not think that this would happen this year given the low level of funding it would generate and the costs of introduction but, after the UK Government announcement on this in November, it was possibly too tempting for the Scottish Government not to follow, although this will not be introduced until 2028.
In effect, this means two new Council Tax bands for properties worth more than £1 million. This will likely mean a modest uplift on current Council Tax levels for properties with these values, likely around 10,000 to 12,000 of Scotland’s 2.7 million dwellings. The Public Finance Minister estimated that this could raise £14 million, which given total Scottish Government revenue of over £90 billion, is very small beer indeed and much of this will need to be spent in conducting the valuation exercise. It did not stop this being flagged as a major change in some of the media though, suggesting that this was more about the politics than anything else. No revaluation of other properties as part of a wider review of Council Tax is planned.
Property Income Taxes May Change .
The UK Government implemented a 2p increase in the basic and upper rate of landlord income tax in its recent budget to take effect from 2027/28. The Scottish Government has not confirmed or denied that it will follow suit as yet, but it will have the power to have separate tax rates for property income if it chooses to do so from this date.
No changes to Residential Land & Buildings Transaction Tax (LBTT) or Additional Dwelling Supplement (ADS).
This is welcome news given there must have been a temptation to go to these particular wells again in a Scottish housing market that is probably best characterised as tepid. There is a wider review of LBTT going on by a team of independent researchers commissioned by the Government.
With Scottish Labour announcing its intention to abstain on the Budget, this almost guarantees its passage through Parliament. The political parties will then get on the hustings and set out their divergent policies on the future. As such, this Budget was merely a preamble to this rather than dealing with the significant future issues today.
As we did correctly predict in our end of year review, this Budget was ‘safe and boring.’