Scottish Budget 2025 to 2026: Your Scotland, Your Finances - a guide

Scottish Budget 2024 to 2025: guide

The Scottish Government is accountable to the Scottish Parliament and to the people of Scotland for its use of public money.

Devolution allows the Scottish Parliament to decide how much money to spend on different policy areas, including:

• schools
• hospitals
• policing
• certain social security benefits
• the economy
• climate change
• the environment

Delivery in these areas involves a range of partners including local government, public bodies and the third sector.

Each year the Scottish Government publishes a balanced budget that sets out the spending plans for the new financial year. The annual Scottish Budget covers each financial year, which runs from 1 April until 31 March, with annual spending amounting to over £50 billion.

The Scottish Budget for 2024-25 has been set at £59.7 billion. A detailed breakdown of spending plans is available on the Scottish Government web site.

This Budget comes at a critical point for Scotland as we transition from the pandemic and respond to the impacts of inflation and the economic shocks caused by Brexit, the war in Ukraine. The Budget seeks to balance the immediate pressures of the current financial landscape while prioritising our three missions and delivering for the people of Scotland:

• equality: tackling poverty and protecting people from harm;
• opportunity: building a fair, green and growing economy;
• community: delivering efficient and effective public services.

The Budget is developed and delivered in partnership with the Scottish Green Party, delivering on commitments made as part of the Bute House Agreement.

How the Scottish Budget Works

The Scottish Budget is a living process that takes place all year round.

It begins with the publication of the Medium Term Financial Strategy (MTFS), normally in May each year. The MTFS sets the medium-term context for annual budget decisions by presenting the outlooks for funding and spending over a five-year period and the Government’s overall strategy for ensuring the sustainability of public finances.

The Programme for Government is published at the start of each Parliamentary year, and sets out the Scottish Government’s objectives and top priorities.  The budget then sets out how the objectives of the Scottish Government will be funded. This year’s Programme for Government followed on from the policy prospectus Equality, opportunity, community: New leadership - A fresh start, which set out the outcomes the Scottish Government wants to achieve by 2026. The three missions of equality, opportunity and community set out in the prospectus run through all three documents and underpin this budget.

Spending decisions are informed by forecasts by the Scottish Fiscal Commission (SFC). The SFC provide forecasts of the Scottish economy, tax receipts, social security expenditure and an assessment of Scottish Government’s projections of borrowing twice yearly – once at the MTFS and once at Budget.

To help understand how the budget might affect different people in Scotland, the Scottish Government also produces the Equality and Fairer Scotland Budget Statement. Another publication on ‘Distributional Analysis’, shows that our tax and social security system is “progressive” - the higher a household’s income, the greater the share of their income they pay in tax, and the less they receive in social security.

The Scottish Government sets out its spending plans in the Scottish Budget and the introduction of a Budget Bill each December. Once the Budget Bill is introduced to Parliament, it goes through 3 stages before coming into effect:

• stage 1: debate on the general principles of the Bill
• stage 2: changes to the Bill are suggested by Scottish Government Ministers
• stage 3: MSPs decide on any further changes proposed by Scottish Government
• ministers and vote on whether to pass the Bill

The budget is then amended during the year via the Autumn and Spring budget revisions, this supports financial scrutiny and allows parliament to authorise any changes to the Budget Bill.

More information on the Scottish Budget process is available.

How the Scottish Budget is funded

The Scottish Budget is funded through a combination of the Scottish block grant (annual funding from the UK Government), taxes raised in Scotland and limited borrowing powers.

The Scottish block grant is annual funding from the UK government, which is effectively a share of funds raised through UK-wide taxes. This is calculated using the Barnett formula, which allocates the Scottish Government a share of total comparable UK spending on devolved areas based on Scotland’s share of the UK population. This usually sits just below 10%. This funding is received as a whole for Scottish Ministers to determine how best to utilise the funds.

This funding is then added to the devolved tax income raised in Scotland to fund spending on devolved public services in Scotland. Currently, around 50% of the Scottish Government’s funds are raised directly in Scotland through taxes.

The Fiscal Framework is an agreement between the Scottish and United Kingdom governments, which details how Scotland must manage its funding. This includes limits on borrowing powers and on the use of a reserve to transfer funding between financial years. The agreement also details the arrangements for the adjustments made to the Scottish block grant, to account for the devolution of certain tax and social security powers – these are called ‘Block Grant Adjustments’.

An updated Fiscal Framework was recently agreed by the Scottish and UK Government.

2024-25 Scottish Tax – Raised in Scotland, Spent in Scotland

The Scottish Parliament has the power to set the rates and bands of Income Tax paid by Scottish taxpayers on non-savings and non-dividend income. This is income earned through employment, self-employment, pensions or property.

Scottish Income Tax is collected by HMRC and the money raised through the tax is then transferred to the Scottish Government.

There are three taxes that are fully devolved and are set by the Scottish Parliament. These are:

• Non-Domestic Rates (NDR), often referred to as ‘business rates’, are a tax paid on non-residential property. Current NDR rates
•  Land and Buildings Transaction Tax (LBTT) is a tax payable on land and property transactions in Scotland over a certain value. Current LBTT rates
•  Scottish Landfill Tax (SLfT) is a tax on the disposal of waste to landfill. The tax provides a financial incentive to reduce the amount of waste going to landfill. Current SLfT rates

Our animated video, ‘Raised in Scotland. Spent in Scotland.’ summarises how tax revenues contribute to the Scottish Budget.

Approach to Taxation

Our approach to taxation is set out in the Framework for Tax. This document sets out the purpose, principles and policy objectives that underpin that approach.

It provides the foundation for design and delivery of tax policies that support our national outcomes and our pursuit of a fairer, greener and more prosperous Scotland for everyone.

Our progressive tax policies are designed to support those on lower and middle incomes, and our approach to taxation will continue to be guided by the strategic objectives and principles set out in our Framework for Tax, which underpins our fair and progressive approach.

Our approach to taxation is also founded upon engagement with stakeholders. This allows us to understand and consider a wide range of views, including from the general public, when designing tax policy.

Our decisions on tax policies will raise the revenues needed to support Scotland’s economy, invest in vital public services, including the NHS and tackling child poverty.

Scottish Income Tax rates and bands for 2024 to 2025

Bands	Band Name	Rate
£12,571* - £14,876	Starter rate	19%
£14,877 - £26,561	Scottish Basic rate	20%
£26,562 - £43,662	Intermediate rate	21%
£43,663 - £75,000	Higher rate	42%
£75,001 - £125,140**	Advanced rate	45%
Over £125,140**	Top rate	48%

* assumes individuals are in receipt of the Standard UK Personal Allowance.

** Those earning more than £100,000 will see their Personal Allowance reduced by £1 for every £2 earned over £100,000.

2024-25 Scottish Budget

Economic Context

The 2024-25 Scottish Budget takes place in challenging economic conditions. Although inflation is falling, consumer prices in 2024-25 are expected to be 20% higher than they were just three years ago. This has created significant challenges for households, communities and businesses, with energy and food prices in particular contributing to the cost of living crisis. Whilst Scotland’s economy has been more resilient than was forecast last December, and is now set to avoid a technical recession in 2023, living standards are not expected to recover to pre-pandemic levels until 2026-27.

The fiscal outlook for the Scottish Government is similarly challenging. The funding we receive has not kept pace with rising inflation, meaning that funding is lower in real terms than it was in 2022-23. We have therefore used our limited set of devolved tax powers to support our vital public services in Scotland, whilst maintaining the progressivity of the tax system.

Total spending plans, at a glance

The approximate planned expenditure for each group of policy areas (known as portfolios) across the Scottish Government is shown below.

Each portfolio supports Scottish Ministers in the delivery of our Programme for Government, and national outcomes for Scotland as set out in the National Performance Framework.

Scottish Government Portfolio	Total Expenditure*
NHS Recovery, Health and Social Care	£19.6 billion
Deputy First Minister and Finance	£16.3 billion
Social Justice	£7.5 billion
Transport, Net Zero and Just Transition	£4.6 billion
Education and Skills	£4.9 billion
Justice and Home Affairs	£3.8 billion
Wellbeing Economy, Fair Work and Energy	£1.3 billion
Rural Affairs, Land Reform and Islands	£1.1 billion
Constitution, Europe, External Affairs and Culture	£332 million
Crown Office and Procurator Fiscal Service	£223 million

*Table 1 – figures may not sum due to rounding

** The Scottish Budget also includes funding for Corporate Running Costs within the DFMF portfolio, which total around £201 million, and funding for the Scottish Parliament and for Audit Scotland, which total around £157 million.

Key Policy Measures

The Scottish Government has adopted a mission-based approach focused on delivering equality, community and opportunity.

Equality: Tackling poverty and protecting people from harm

In this budget, we are:

• committing £6.3 billion in social security benefits and payments, just over £1 billion more than in 2023-24 – enabling disabled people to live full and independent lives, supporting older people to heat their homes in winter, and helping low-income families with their living costs. This includes increasing the Scottish Child payment in line with inflation to £26.70 a week, giving more support to over 323,000 under 16s who receive it.
• maintaining our commitment to invest £1 billion over the course of this parliament to tackle the poverty related attainment gap, with £200 million to be distributed in 2024-25 - providing vital long-term targeted investment to improve outcomes for children and young people and help break the cycle of poverty.
• funding the £12 per hour real Living Wage for adult and children’s social care and early learning and childcare workers in the private, voluntary and independent sectors who deliver funded provision.
• helping households through the cost-of-living crisis by making available an additional £144 million of funding to councils who agree to fully fund a council tax freeze in 2024-25 (equivalent to a 5% increase). Combined with the other support being provided to local government this will increase their overall funding by six percent since the last budget.

Opportunity: Building a fair, green and growing economy

In this budget, we are:

• supporting the green economy and future jobs by investing £66.9 million to kickstart our commitment of up to £500 million to anchor a new offshore wind supply chain in Scotland.  
• helping more people install clean heating systems and make their home more energy efficiency by investing £358 million in the coming year - tackling emissions and supporting the creation of jobs.
• ensuring people have access to viable alternatives to car use by spending £2.5 billion on public transport and lifting active travel funding to £220 million in the year ahead.
• commencing work on dualling the Tomatin to Moy section of the A9 and investing in the next phases of the A9 dualling programme.

Community: Delivering efficient and effective public services

In this budget, we are:

• giving our NHS the protection of an uplift above real terms in the face of UK Government austerity by investing over half a billion in our frontline boards – taking total investment to £13.2 billion in the year ahead.
• investing £1.55 billion in policing, increasing the Scottish Police Authority resource budget by 5.6% - providing an additional £75.7 million to support frontline service delivery. We will also support Scottish Fire and Rescue Service (SFRS) deliver with a resource uplift of £13.6 million and increasing capital investment by £10.3 million to £43 million.
• boost investment in digital connectivity from £93 million to £140 million, delivering critical infrastructure for a green and growing economy. This includes connecting over 114,000 homes and businesses through the R100 broadband programme, extending the fibre backbone that will enable Scotland’s businesses to grow and support our ambitions for Scotland to become a green data hosting location.
• maintaining a competitive non-domestic rates regime by ensuring that over 95% continue to be liable for the lowest non-domestic rate in the UK and that over 100,000 properties are taken out of rates altogether.
• increase funding for culture and heritage this year by almost £16 million, the first step on the way to investing at least £100 million more in culture and the arts by 2028-29.

2024-25 Scottish Budget Bill

The Budget (Scotland) (No. 3) Bill was passed by Parliament following the Stage 3 debate on 27 February 2024, where it was announced that:

• the Scottish Government is creating a new Housing Investment Taskforce, chaired by the Housing Minister, to unlock greater private sector investment in housing.
• up to £62.7 million of additional funding will be provided for Local Government in addition to the £147 million already made available that is contingent on the freeze to the council tax.
• the local government Islands Cost of Living Fund would be increased from £1 million to £5 million to support those services.

These commitments are dependent on additional funding being confirmed by the UK Government in the Spring Budget on 6 March. 

The Bill was amended at Stage 3, following changes to the First Minister’s Cabinet during the passage of the Bill. The amendments were:

• the Wellbeing Economy, Fair Work and Energy (WEFWE) portfolio has been renamed to Wellbeing Economy, Net Zero and Energy (WENZE).
• the Transport, Net Zero and Just Transition (TNZJT) portfolio has been renamed to Transport.
• all non-Transport budget lines have been moved from the Transport portfolio to the Wellbeing Economy, Net Zero and Energy (WENZE) portfolio. This results in a £732.8 million increase to the Budget for WENZE and a corresponding decrease in Transport.

The total spending plans for the 2024-25 Scottish Budget, following these announcements and changes to the Cabinet in February 2024, are shown below.

Scottish Government Portfolio	Total Expenditure*
NHS Recovery, Health and Social Care	£19.5 billion
Deputy First Minister and Finance	£12.9 billion
Social Justice	£7.5 billion
Transport	£3.9 billion
Education and Skills	£3.8 billion
Justice and Home Affairs	£3.8 billion
Wellbeing Economy, Net Zero and Energy	£2.0 billion
Rural Affairs, Land Reform and Islands	£1.1 billion
Constitution, Europe, External Affairs and Culture	£315.6 million
Crown Office and Procurator Fiscal Service	£223 million

*Table 2 – figures may not sum due to rounding

 

Autumn Budget Review

The 2024 to 2025 Autumn Budget Review is part of the normal in-year revision process and was published on 3 October 2024.

Following his appointment in May 2024 the First Minister announced a restructured cabinet with a number of changes to portfolio responsibilities. The Autumn Budget Revision presents the budgets based on the new portfolios.

Following the completion of the 2024 to 2025 Scottish Budget additional funding has become available and the Autumn Budget Revision provides the opportunity to apply this funding.

On the 3rd of September the Cabinet Secretary for Finance and Local Government gave a Fiscal Update Statement to the Scottish Parliament where she set out the challenging financial position and the choices that have been made to ensure a balanced budget can be achieved in 2024/25. 

As part of the statement £188.4 million of in-year savings were set out.  Where these savings have been finalised they are reflected in the funding changes outlined as part of the Autumn Budget Revision. . The remaining savings will be included within the Spring Budget Revision.

The key changes applied are:

• £1,058 million of additional resource is being provided to the Health and Social Care portfolio. £864 million is to support Health services. The remaining £194 million is provided for additional costs of enhanced employer pension contributions.
• Local Government will receive an additional £155.9 million in funding as part of the Autumn Budget Revision. This £86.2 million of consequential funding for additional costs of enhanced employer pension contributions for Teachers,
• £62.7 million of funding to councils freezing council tax and the £4 million Island Cost of Living Fund both of which the Cabinet Secretary confirmed to CoSLA and council leaders on the 15th of April.  A further £3 million is being provided to support the council tax freeze following engagement with CoSLA (on top of the £147 million provided at Budget Bill).
• funding for the Social Justice portfolio is being reduced by £160 million. £148 million of this reduction reflects the estimated change to Scottish Government funding following the UK Government’s own decision to limit eligibility for Winter Fuel Payment and the Scottish Government decision to replicate this for Pension Age Winter Heating Payments (PAWHP).

Scottish Government Portfolios	Opening Budget	Change Proposed	Revised Budget
	£m	£m	£m
Health and Social Care	19,558.6	148.5	19,707.0
Social Justice	7,564.0	(242.6)	7,321.4
Net Zero and Energy	831.4	(80.4)	751.0
Education and Skills	4,859.7	(321.9)	4,537.8
Justice and Home Affairs	3,580.5	15.7	3,596.2
Transport	3,703.7	(46.9)	3,656.9
Rural Affairs, Land Reform and Islands	1,109.8	(9.8)	1,100.0
Constitution, External Affairs & Culture	280.8	0.3	281.2
Finance and Local Government	12,439.3	1,550.2	13,989.5
Deputy First Minister, Economy and Gaelic	1,331.0	83.9	1,414.9
Crown Office and Procurator Fiscal Service	222.9	2.5	225.4
Total Scottish Government (Consolidated)	55,481.8	1,099.5	56,581.2
Scottish Housing Regulator	5.6	0.0	5.6
National Records of Scotland	34.5	0.6	35.1
Office of the Scottish Charity Regulator	3.6	0.0	3.6
Scottish Courts and Tribunals Service	165.9	24.4	190.3
Scottish Fiscal Commission	2.7	0.0	2.7
Revenue Scotland	11.0	0.0	11.0
Registers of Scotland	10.0	0.0	10.0
Environmental Standards Scotland	3.0	(0.1)	2.9
Food Standards Scotland	22.9	0.5	23.4
Consumer Scotland	2.4	1.7	4.1
Scottish Teachers’ and NHS Pension Schemes	3,422.4	0.0	3,422.4
Total Scottish Administration	59,165.9	1,126.5	60,292.3
Direct Funded Bodies
Scottish Parliamentary Corporate Body	143.1	0.0	143.1
Audit Scotland	13.5	0.1	13.6
Total Scottish Budget	59,322.5	1,126.6	60,449.0

Scottish Budget Contact Details

This document is published by the Directorate of Budget and Public Spending, and the Directorate of Tax and Revenues.

Address:

The Scottish Government
St Andrew’s House
Edinburgh
EH1 3DG

Email: ScottishBudget@gov.scot