The Scottish government has unveiled its 2026/27 Budget and how it intends to spend around £68 billion.
Here are the measures of interest to small businesses.
Business rates
Ahead of the Scottish Budget, business groups warned many businesses will be forced to close due to increases in business rates as a result of this year’s property revaluation.
The Scottish Budget said “we have listened to businesses and understand the cost pressures which they continue to face”. It announced the following:
- Reduction in property rates: Basic property rate reduced from 49.8p to 48.1p, intermediate property rate reduced from 55.4p to 53.5p and higher property rate reduced from 56.8p to 54.8p.
- 15% relief for the next three years for retail, hospitality and leisure premises liable for the vasic or intermediate property rates (with a rateable value up to and including £100,000), capped at £110,000 per business per year.
- 100% relief for the next three years for retail, hospitality and leisure premises located on islands and specified remote areas, capped at £110,000 per business per year.
- Continue the Small Business Bonus Scheme for the next three years.
Income tax
The government intends to increase the basic and intermediate rate income tax thresholds by 7.4%. The basic rate threshold will increase from £15,398 – £27,491 to £15,398 – £27,526, and the intermediate rate threshold will increase from to £27,492 – £43,662 to £29,527 – £43,662.
Business support
Funding of £326 million for Scotland’s enterprise agencies. It will be allocated as follows:
- Scottish Enterprise: £237.1 million.
- Highlands and Islands Enterprise (HIE): £56.3 million.
- South of Scotland Enterprise (SOSE): £32.2 million.
Funding of £200 million for the Scottish National Investment Bank.
Funding of £2.5 million to support young entrepreneurs. The government said it will work with “key stakeholders like King’s Trust to support the delivery of this new opportunity with recurring future investment”.
Support for international trade will be increased. In June, the Scottish government said it will introduce a six point export plan, including providing grants to help Scottish companies access international opportunities.
Private jet tax
The government intends to introduce a private jet supplement in 2028/29 which it said is “in line with the principle that higher rates of tax should be paid by those who choose to travel on private jets, which produce significantly more emissions per head than commercial flights”.
Creative industries
A funding increase of £20 million will be provided to Creative Scotland. It includes an additional £800,000 for Screen Scotland, taking its funding to £12 million.
Local communities and high streets
Funding of £47 million to “support the regeneration of communities and town centres to strengthen local economies”. It includes increased investment for Business Improvement Districts and the Scotland Loves Local initiative.
Tourism
Funding of £4 million for VisitScotland to manage the Rural Tourism Infrastructure Fund (RTIF), which awards grants to improve the visitor experience in rural parts of Scotland that are experiencing visitor management issues as a result of additional visitors.
Apprenticeships and skills
Funding will be provided to enable the delivery of 25,000 modern apprenticeships, 5,000 foundation apprenticeships and at least 1,200 graduate apprenticeships in 2026‑27.
Reaction to Scottish Budget 2026
Guy Hinks, Scotland chair, Federation of Small Businesses:
“We are disappointed the Scottish government has chosen not to go further to protect small businesses from further damaging tax rises.
“We recognise that reducing the poundage rate used to calculate final bills and extending other reliefs will protect local firms from some of the potential increases.
“However, given the extent of the increases small businesses are facing, with rises of up to 400%, this is effectively a drop in the ocean. Returning the Small Business Bonus Scheme to its previous levels of relief, for example, would have offered much more support to smaller firms. Instead, we’re now looking at introducing further complexity into an already difficult to navigate system, for limited benefit to those facing yet another increase to the cost of running their business.
“For many firms, rates are one of the largest fixed costs they face. The Scottish government is asking local employers to absorb yet another blow at a time when margins are already under severe pressure. This is a missed opportunity to back the businesses that anchor high streets and local communities.
“Our members have been clear that further increases in business rates would reduce investment, threaten jobs and, in some cases, force closures. Small firms cannot simply pass these costs on to customers.
“If ministers are serious about economic growth and thriving town centres, they must urgently reconsider their approach and bring forward measures that provide certainty, fairness and genuine support for the smallest employers.”
Leon Thompson, executive director, UKHospitality Scotland:
“Today’s Budget has not sufficiently addressed the challenges that hospitality businesses in Scotland face, and the majority will still be paying higher business rates bills in April.
“While the reduction in the poundage is positive, it does not offset significant increases in business revaluations and the loss of 40% relief.
“The increases to rateable values, often in excess of 100%, bear no relation to the trading environment hospitality businesses are operating in and they cannot trade their way to paying higher taxes.
“The package of reliefs put forward to help mitigate the impact of these increases is merely a sticking plaster to cap eye-watering bills. The increases facing our local pubs, hotels, restaurants and cafes over the next three years are still staggering.
“I urge the Scottish government to go further in its support of hospitality, or we will only see job losses and business closures accelerate as a result of our sector’s ever-increasing tax burden.
“The commitment to pass on any additional funding from further support for the sector on business rates in England is crucial, and I hope the Scottish government will move swiftly to use those funds, should that support be announced in England.”
Marc Crothall, chief executive, Scottish Tourism Alliance (STA):
“Today’s Scottish Budget has acknowledged some of the intense pressure facing Scotland’s tourism and hospitality sector, but unfortunately, the levels of transitional relief and support announced to stabilise the industry and restore confidence still fall way short of what is needed now.
“In the days and weeks leading up to the Budget, tourism and hospitality organisations, business groups, chambers of commerce, small business representatives and Business Improvement Districts were united in warning that failure to act on business rates would push businesses to the brink. While the Scottish government has responded with a package of modest short-term mitigation, the underlying issues within the system remain unresolved.
“The introduction of transitional relief, reductions to the basic and intermediate rates, and the modest 15% of non-domestic rates relief for retail, hospitality and leisure businesses will provide temporary breathing space for some, but not nearly enough to prevent potential closures and job losses. The continuation of the Small Business Bonus Scheme and 100% relief in islands and designated remote areas will be welcome for the businesses and communities most exposed to rising costs.
“However, these measures do not respond to the scale of the challenge facing tourism and hospitality businesses across Scotland. Relief is capped, time-limited, and does not address the volatility created by revaluation or the cumulative burden of rising costs, leaving many businesses still on the precipice of commercial viability.
“Recent STA research shows more than 70% of tourism businesses expect conditions to worsen. Nearly half are delaying or cancelling investment. 15% expect to make redundancies within months, and many have already cut costs as far as they can. There is no slack left in the system – margins are wafer-thin.
“The options available to businesses in our sector are limited, and all will come at a significant and far-reaching cost. Some businesses will try to raise prices, despite consumers having less money to spend, ultimately increasing customer expectations around quality, which raises concerns when the ability to invest and deliver that quality is so constrained.
“Additional investment announced for VisitScotland, including funding to support the Rural Tourism Infrastructure Fund and continued backing for major cultural and sporting events, is welcome. This investment will help with destination promotion, regional infrastructure and short-term visitor demand, but it does not address the core cost, competitiveness and viability challenges facing tourism and hospitality businesses on the ground
“Tourism is one of Scotland’s most important economic drivers, capable of accelerating growth and strengthening public finances. This Budget was an opportunity to stabilise the sector and put it on a path to deliver its full economic potential. While some short-term relief has been provided, the opportunity has not been fully realised.
“The STA has set out a clear economic mandate for the next Parliament in our Holyrood election manifesto. As we move into the final months before the Scottish Parliament election, we are calling on all political parties to commit to a fairer and more proportionate business rates system that supports investment, jobs and long-term competitiveness.
“Tourism and hospitality businesses want to invest, grow and support communities across Scotland. Without decisive reform, the consequences of continued uncertainty will be felt within and far beyond our sector.”
Dr Liz Cameron, chief executive, Scottish Chambers of Commerce:
“In December, SCC called for the Scottish government to provide immediate relief to firms battling cost pressures by cutting NDR, and to implement wider reforms to our skills and planning systems which would strengthen the foundations and lead to growth over the long-term. This pragmatic, deliverable package of measures would have effectively hit the reset button on Scotland’s economy.
“We are encouraged that the government has listened to some of these proposals, demonstrating that it shares the ambitions of Scotland’s entrepreneurs. It offers a glimmer of hope but we need more support and more ambition to fully restore confidence and help all our struggling businesses.
“Scotland’s political leaders must now partner with the business community to deliver clear, joined-up policy to build on this Budget changes to secure the future of thousands of businesses across every region and sector of the Scottish economy.”
On business rates: “Last week, SCC issued a stark warning on proposed NDR hikes, cautioning the government that inaction risked pushing businesses to the brink. While we welcome the fact that the government took notice, reducing business rates and providing transitional relief ahead of the 2026 revaluation, it’s important to look at the combined impact.
“For a small number of businesses, significant increases in rateable value risk pushing them beyond eligibility thresholds for support, creating cliff-edge effects despite no improvement in trading conditions. The government must clearly state how it is planning to support the businesses who are at risk of falling through the cracks.”
On skills: “SCC has long called for a realignment of Scotland’s skills system to meet employer needs and fuel the industries of the future.
“Today’s announcements offer hope, but must go further if we are to realise our full potential. A 10% funding increase of £70m for Scotland’s colleges, combined with a commitment to 31,000 additional apprenticeships targeted to offshore wind, oil and gas, and agriculture will expand the skills base of Scotland’s workers, and raise the competitiveness of the businesses who employ them. The government must now clearly lay out how this funding will be allocated, and how it will involve employers in those discussions.”
On income tax: “The increase in the threshold for basic and intermediate tax rates by 7.4% is a step in the right direction. By reducing the tax burden for 55% of Scots, the government will stimulate demand in the economy.”
David Lonsdale, director, Scottish Retail Consortium:
“Scottish ministers seem to have their heart in the right place by providing a limited business rate discount for retail and hospitality businesses; but we fear they have significantly stumbled on the detail. At first glance, the cap on the relief which can be claimed means it falls well short of the permanent business rate discount on offer to retailers in England.
“Medium-sized and larger retailers underpin the vitality of our high streets and town and city centres. Those businesses drive footfall and account for a large share of retail employment. By fumbling the chance to adequately match England’s more competitive rates regime we risk becoming materially less attractive as a location for investment. We fear this will have unwelcome consequences for retailers’ investment plans and the health of Scotland’s retail destinations.”
Scottish Licensed Trade Association:
“The fate of many businesses and the jobs they provide in Scotland’s licensed hospitality sector lay in the hands of the Scottish government and a lifeline for many operators was not just hoped for but prayed for in the Scottish Budget this afternoon.
“Of course, we all want to see adequate funding for the NHS and social welfare reform, but the government needs revenue to do that, and if businesses continue to close, cut back on services or opening hours and reduce jobs, coupled with reduced profit margins, where will that revenue then come from?
“With commercial rates being squarely within the Scottish government’s remit, it was an area they could have done something meaningful with to help licensed hospitality businesses. Businesses that have, for decades, proportionately paid more than other business sectors due to the archaic system of methodology used specifically for the industry.
“Commercial rates, particularly with the new rates revaluations for the next three years, is the hot issue for the licensed hospitality sector. That is why the Scottish Licensed Trade Association and other key industry bodies urged the Scottish government to continue with the current 40% support package. But we also sought removal of the £51,000 RV cap, which excluded over 2,500 businesses from receiving support, coupled with the introduction of a robust package of non-domestic rates support until the Scottish government’s review of licensed hospitality non-domestic rates is completed.
“Whilst there has been a reduction in the basic, intermediate and higher property poundage rates to 48.1p, 53.5p and 54.8p respectively, the sector is still faced with the loss of the 40% discount for some businesses, replaced with a 15% relief in 2026/27 for the retail, hospitality and leisure sector liable for the basic or intermediate poundage rate, now that the £51k cap has been removed, and astronomical increases in rates bills, due to the recent revaluation, this Budget has gone nowhere near far enough to meaningfully help the industry.
“And let’s not forget there continues to be no relief support for businesses paying the higher poundage rate. All this on top of the years of financial support disparity between Scotland and businesses in England, which led to Scottish businesses paying between 112% and 176% more in rates than those rated exactly the same in England.
“To give that some context, a premises in England with a rateable value of £75,000 paid nearly £45,000 in commercial rates over the last three years – in Scotland they would have paid just over £120,000.
“The devil will be in the details following the Budget announcement and will need to be assessed further but it is no wonder there is a very real anger towards the Scottish government for its failure to provide meaningful support to the sector in Scotland.
“With the Westminster government considering further support for pubs in England, following its derisory reduction in their poundage rate, the Scottish government has committed to looking at any further support given by Westminster to the sector which will come to Scotland through the Barnett consequentials.
“However, the Scottish government doesn’t exactly have a good record of passing on funding through the Barnett consequentials directly to Scotland’s pubs and bars, who have previously lost out on 2 years of 75% rates relief given to pubs and bars in England.
“Let’s hope this time it will be different.”