Gavin Brown

The recent UK budget announced a new, separate higher income tax regime for property income which will apply in England, Wales, and Northern Ireland from April 2027. This change does not automatically apply to landlords in Scotland, as income tax on property income is devolved to the Scottish Parliament.

Gavin Brown, tax director at Wbg, said that an additional 2% tax on property income at the basic, higher and additional rates for individuals announced in the UK budget will not apply in Scotland, where property income is currently taxed at the already higher Scottish rates of income tax.

“The Chancellor has effectively created a new income tax regime for property income,” he said.

“While the current Scottish income tax rates for rental income remain in place for now, the Scottish government may choose to mirror the UK-wide 2% increase in its own future budgets.”

Yet Mr Brown suggests that, given the historic trend of higher rates of taxation in Scotland than elsewhere in the UK, and the impact that a tax increase in England can have on the Scottish government’s budget, landlords should anticipate that the Scottish government may implement a higher rate of tax on property income and so should speak to their professional advisor for advice.

“Landlords should consider the impact an additional 2% tax on property income could have on their portfolio and whether continued investment remains viable,” he said.

“Tax advisors can calculate what the potential impact of such a tax increase could be for landlords going forward, can provide advice on potential incorporation of their portfolio, or calculate the tax position on any potential sale of properties.”

The Scottish Government will decide on its own property income tax rates in its next Budget on 13 January 2026.