Hello,
This week, the Scottish Budget has been released. Other highlights include a First Tier Tribunal (FTT) decision on whether an e-learning training platform qualified for Research & Development (R&D) relief, and updates to HMRC’s List 3 (approved professional organisations and learned societies).
On Tuesday, the Scottish Budget was presented to Holyrood. As a result, we now know that the highest three Scottish Income Tax bands will be frozen until 2028-29, making it likely that more people will be pushed into higher rates of tax in the coming years due to fiscal drag.
For 2026-27, the Basic and Intermediate rate Income Tax thresholds will increase by 7.4%, which, for those that fully benefit, will yield a saving of £32 per annum. Taxpayers earning £25,782 (full-time at the Real Living Wage) will be better off by £11 a year.
Comparing the relative Income Tax position of a Scottish taxpayer to a taxpayer in the rest of the UK, an individual earning less than £33,493 in Scotland (the break-even point) is better off, potentially by up to £40 per annum, depending on income levels. As income increases, the comparison becomes increasingly stark; a Scottish taxpayer earning £50,000 will, in 2026-27, pay almost £1,500 more in Income Tax than a taxpayer in the rest of the UK.
One headline announcement was the introduction of two new high-value Council Tax bands in Scotland from 1 April 2028. Unlike the High-Value Council Tax Surcharge announced for England, which will apply to properties valued over £2 million, the additional Scottish bands will impact properties worth more than £1 million.
It appears that the Scottish Government will explore alternative options for taxation, including wider wealth taxes. See our comprehensive summary of the Scottish Budget below for much more detail on the announcements made.
In other news, following the UK’s Budget and publication of the Finance Bill, we continue to examine the details of the proposals. This week, we feature several of our updated subscriber Budget guides, which answer many frequently asked questions on the changes.
More news, cases and updates below.
The rossmartin.co.uk tax team
Online PRACTICAL tax resources for accountants and tax advisers BY accountants and tax advisers.
Quick News
Scottish Budget 2026-27
Shona Robison MSP, Cabinet Secretary for Finance and Local Government, presented her 2026-27 Budget to the Scottish Parliament on Tuesday, 13 January 2026. Key announcements included above-inflation increases to the Basic and Intermediate rate Income Tax thresholds for 2026-27, and new Council Tax bands from 1 April 2028 for residential properties valued at over £1 million.
List 3 updates: approved organisations and societies
Over the last six months, HMRC have regularly updated ‘List 3’, its list of approved professional organisations and learned societies. Several new organisations have been added.
Tax Cases
R&D relief claim for specialised educational platform rejected
In M&C Educational Training Services Ltd v HMRC [2025] TC09709, the First Tier Tribunal (FTT) found that expenditure on an e-learning training platform related to an advance in education, a social science, and did not qualify as Research and Development (R&D) expenditure for the purposes of claiming relief.
UT splits FTT decision on bank transfers and credit card remittances
In Afzal Alimahomed v HMRC [2025] UKUT 00428, the Upper Tribunal (UT) found that bank transfers from an offshore account to UK recipients amounted to taxable remittances, but the First Tier Tribunal (FTT) had erred in its treatment of offshore credit card transactions.
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Failure to notify chargeability to tax
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Guides & Updates
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Compare software for Making Tax Digital for Income Tax
What software is available for MTD for Income Tax? It is worth noting that HMRC have ceased publishing a list of suitable MTD software. Instead, there is now a questionnaire for sole traders and landlords and for agents acting on behalf of clients.
Losses, trade losses and sideways relief
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Directors & Companies
Tax-efficient extraction of profits: toolkit (2025/26)
This is a general guide and refresher which aims to help a company and its owner decide how company profits are to be extracted based on current tax rates, reliefs and allowances.
Employers
PAYE Settlement Agreements
What are PAYE Settlement Agreements? How do they work? What can be included?
Payrolling of benefits
The value of certain taxable Benefits In Kind can be included in taxable pay when calculating the PAYE deducted from payments of wages and salaries to employees.
Private Client & Estate Planning
Provisional and estimated figures in tax returns
What is the difference between a provisional and an estimated figure in a tax return? When should provisional figures be used? What are the reporting requirements? When can HMRC charge a penalty?
Income Tax and National Insurance (for individuals): Autumn Budget 2025
Changes to Income Tax and National Insurance (for individuals) announced at the 2025 Autumn Budget on 26 November 2025 include an increase in the rates of Class 2 and Class 3 National Insurance, separate rates of Income Tax for property income, an increase in the rates of tax on savings income, an increase in the rates of dividend tax and a reform to the current ISA system.
Land & Property
Adviser's Guide: Property Business, profits and losses
What is property income? How is it taxed? How are profits calculated? How are losses relieved? Is National Insurance paid on property income? Is property income classed as a business activity?
Overseas & Residence
Overseas & Residence: Autumn Budget 2025
Changes to overseas and residence announced at the 2025 Autumn Budget on 26 November 2025 include aligning PAYE and Overseas Workday Relief, abolition of the dividend tax credit for non-UK residents and changes to voluntary NICs for periods spent abroad.
Capital Allowances
Capital Allowances: Autumn Budget 2025
Changes to Capital Allowances announced at the 2025 Autumn Budget on 26 November 2025 include a new 40% First Year Allowance for companies and unincorporated businesses and a reduction to the main rate of Writing Down Allowance.
Penalties & Compliance
Notice to file a tax return: section 8(1) TMA 1970
A guide to explain the implications of a notice sent to an individual under s.8(1) TMA 1970 to file a tax return.
VAT
Flat Rate Scheme: Limited cost trader
From 1 April 2017 a new category of trader, a ‘limited cost trader’, with a Flat Rate Scheme (FRS) percentage of 16.5% applies to FRS users.
Flat rate scheme: Farmers
What is the agricultural Flat Rate Scheme? Who can use it? What are the conditions? What is the benefit? What about non-farming income?
Continuing Professional Development (CPD)
Recent and upcoming webinars include:
- Inheritance Tax Planning for 2026/27 and Beyond
- Monthly Tax Update - December 2025
- Budget Update
- Practice Insight - December 2025 (free)
- Making Tax Digital for Income Tax - Roadmap to April 2026
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Virtual Tax Partner© Support
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