The Scottish Government’s 2026-27 budget, announced by Finance and Local Government Secretary Shona Robison, has sparked concern among landlords and property sector representatives. Key measures include the introduction of two new council tax bands for properties valued over £1 million from April 2028, while existing Land and Buildings Transaction Tax (LBTT) thresholds remain unchanged. The budget also confirmed no increase in the property income tax rate, diverging from Westminster’s planned 2% rise in April 2027.

New Council Tax Bands and Their Impact on Landlords

The budget’s proposal to introduce additional council tax bands for high-value properties has been met with scepticism. These bands will apply to homes valued above £1 million, effectively creating a form of mansion tax in Scotland starting in 2028. This move is intended to generate additional revenue but raises questions about property valuation methods and the potential impact on the private rented sector.

David Alexander, Chief Executive of DJ Alexander Scotland, highlighted concerns regarding the valuation process and the limited number of properties affected. He suggested the measure may be more politically motivated than a genuine revenue strategy. For landlords managing high-value properties, this change could mean increased costs and administrative complexities.

Landlords’ Reaction: Disappointment and Calls for Clarity

John Blackwood, Chief Executive of the Scottish Association of Landlords, expressed disappointment with the budget, particularly the Finance Secretary’s reluctance to rule out a future 2p increase on property income tax. This uncertainty is seen as a barrier to investment within Scotland’s private rented sector, which is already navigating a challenging environment.

While the budget maintains the current LBTT additional dwelling supplement rate, Blackwood described the overall package as a missed opportunity to provide landlords with the confidence needed to invest in their properties and support housing supply.

Property Sector’s View: Missed Opportunities to Address Housing Challenges

Timothy Douglas, Head of Policy and Campaigns at Propertymark, criticised the budget for failing to adequately address the housing emergency. Despite commitments to affordable housing investment and homelessness prevention, Douglas pointed out that the continuing LBTT thresholds act as a barrier to mobility and investment in the private rented sector.

He emphasised that the Housing Investment Task Force had recommended reviewing property tax to stimulate housing supply and economic growth. The introduction of additional council tax bands, he argued, adds further disparity in housing costs rather than resolving underlying issues.

Concerns Over Housing Supply and Private Rented Sector Support

David Alexander also noted that while the budget promises record investment of £4.9 billion for 36,000 affordable homes over four years, it falls short in addressing long-term stagnation in social housing construction. Furthermore, no new measures were introduced to support housebuilders or the private rented sector, both critical components in tackling Scotland’s housing shortage.

With newbuild starts at a decade low and the housing emergency approaching its second anniversary, industry voices see the budget as lacking a coherent, long-term housing strategy. This absence of targeted support for the private rented sector may hinder efforts to increase housing availability and affordability.

Implications for UK Landlords and Agents

For landlords operating in Scotland, the budget signals a cautious approach by the Scottish Government towards property taxation, with some new burdens on high-value properties but no immediate increase in property income tax. The uncertainty around future tax rises may affect investment decisions and rental market dynamics.

Agents and property managers should prepare for the administrative implications of new council tax bands and monitor potential legislative developments related to property income tax. Understanding these changes will be essential for advising clients and managing portfolios effectively.

Looking Ahead: Support and Resources for Landlords

In response to ongoing challenges in the property sector, the Landlord Association (TLA) is launching a new Trusted Partners Hub in Q1 2026. This initiative will feature verified and approved service providers across legal, trades, insurance, financial, mortgage, tenant screening, and other sectors to support landlords, tenants, and property management businesses. Service providers interested in joining can register their interest at the Landlord Association website.