SNP’s Modest £40 Tax Cut for Low Earners in 2026 Budget

The Scottish government has announced a modest income tax cut for lower earners as it reshapes its budget in the run-up to the Holyrood elections, drawing on reserves, trimming spending plans and increasing borrowing to fund a package of new pledges.

SNP’s Modest £40 Tax

Ministers from the Scottish National Party have raised the income tax thresholds for people earning less than £33,500 a year by 7.4 percent. The change, which takes effect in April, will leave the lowest earners up to £11 a year better off, with most seeing smaller weekly gains.

Scotland’s finance secretary, Shona Robison, said the move meant that 55 percent of taxpayers in Scotland would take home up to £40 a year more than if they lived elsewhere in the UK.

The tax cut, costing the devolved government £50 million in the next financial year, comes just four months before voters go to the polls in May. It forms part of the SNP’s effort to retain power and blunt Labour’s appeal ahead of the election.

Alongside the income tax changes, Robison announced a series of policy commitments. Payments for Scotland’s poorest families will rise, with the Scottish child payment increasing to £40 a week for children under one from 2027. Private jets will face higher air passenger duty from 2028, homes valued above £1 million will move into new higher council tax bands from the same year, and college funding will rise by 10 percent after years of reductions.

“This is a government that wants what is best for Scotland,” Robison said. “Because of our cost of living commitments, people will be better off in many ways simply because they live in Scotland.”

Opposition parties and economic analysts were quick to criticise the overall package. The Institute for Public Policy Research and the Institute of Chartered Accountants of Scotland accused the government of tinkering with an already complex tax system without addressing deeper problems.

Scottish Labour said it would instead target tax relief at middle earners to address a national insurance anomaly that leaves some facing marginal tax rates of around 50 percent. Labour’s finance spokesperson, Michael Marra, said voters were “paying the price for SNP incompetence” and blamed sluggish economic growth for leaving households poorer.

Stephen Boyd, director of IPPR Scotland, described the budget as “tepid” and said it failed to confront major challenges such as child poverty, climate change, public service reform and long-term economic growth. He warned that short-term, politically driven tax changes were being prioritised over a credible revenue strategy.

The Institute for Fiscal Studies also raised concerns, predicting that NHS and social care budgets would face pressure because planned increases of 0.7 percent would not be sufficient. David Phillips, the IFS expert on devolved finance, criticised officials for burying key figures in annexes, saying voters deserved clarity, especially in an election year.

Economists at the Fraser of Allander Institute said the headline figures masked real cuts. Deputy director João Sousa said day to day spending had effectively been reduced by £480 million compared with last year’s plans, with the government relying on one-off funding streams to balance the books.

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Higher earners will continue to pay more income tax than elsewhere in the UK. Thresholds for Scotland’s higher tax rates will be frozen for the next three years, a move expected to push more than one million people into the top three bands by 2030. The Scottish Fiscal Commission said the freeze would boost income tax receipts by £200 million in 2028 and 2029.

The commission’s chair, Graeme Roy, said the budget depended heavily on promised public sector workforce reductions and ambitious efficiency savings, warning that delivery would shape the state of public services beyond the election.

The changes follow criticism of the Scottish government’s long-standing claim that most people pay less income tax in Scotland than in the rest of the UK. New data from HMRC and the fiscal commission found that claim to be inaccurate. However, the threshold rise means that from April most lower earners will indeed pay less than their counterparts elsewhere in the UK.

For anyone earning below the median income, tax bills will fall by about £40 a year, or 75 pence a week. Adjusted for inflation, only those earning under £32,000 will be slightly better off in real terms.

The housing charity Shelter Scotland welcomed an extra £34 million for social housing, intended to help build 36,000 homes. However, it warned this still left a shortfall of 26,000 homes against the government’s target for 2032. Director Alison Watson said failing to meet that target would drive up homelessness, child poverty and long-term public costs.