The Council Tax Timebomb - Why Scotland's Next Budget Could Mean Double-Digit Pain for Households

11th January 2026

As Scotland awaits next Tuesday's Budget, a familiar anxiety is resurfacing in households across the country: how much more will council tax rise — and how much worse can it get?.

Nowhere is that question more pressing than in Highland, where the council's finances are already stretched to breaking point. While ministers may avoid spelling it out in advance, the evidence from council budgets, audit reports and recent tax decisions points in one direction: significant council tax increases are no longer the exception — they are becoming the norm.

From Freeze to Freefall

For more than a decade, council tax in Scotland was politically frozen or tightly constrained. That period is now decisively over. In the past two budget cycles alone, councils across Scotland have imposed the largest increases in living memory, often in the high single digits or more.

This is not a coincidence. Local government funding has failed to keep pace with inflation, wage pressures and rising demand — particularly in social care, education and transport. The result is a widening structural gap between what councils are required to deliver and what they are funded to provide.

Council tax, despite accounting for less than a fifth of local authority income, has become one of the few levers councils can still pull.

Highland - A Case Study in Financial Strain

Highland Council's position is especially stark. It serves the largest geographic area of any local authority in the UK, faces higher delivery costs for basic services, and has limited scope for economies of scale.

Recent audit and budget papers show:

A budget gap running into tens of millions of pounds, projected to grow substantially over the next few years

Heavy reliance on savings plans that are increasingly difficult to realise without service reductions

A growing dependence on council tax increases simply to stand still

The council has already approved a 7 per cent rise in council tax in the current year — a level that would once have been politically unthinkable. Importantly, this was not presented as a one-off emergency measure, but as part of a broader medium-term strategy.

That matters, because it signals something deeper: Highland is planning for a future where repeated above-inflation council tax rises are normalised.

What Next Tuesday’s Budget Really Means

The Scottish Budget sets the overall funding envelope for councils, but it does not set council tax levels. That responsibility — and the political fallout — sits squarely with local authorities.

What ministers do decide, however, is whether councils receive enough funding to avoid passing the pain on to residents.

So far, there is little evidence to suggest a dramatic change in approach. The Scottish Government has not committed to restoring funding in real terms, nor ruled out councils raising taxes further. If funding uplifts fall short of inflation as many expect councils will face an unenviable choice:

Cut services that are already under strain

Or increase council tax again — possibly by 7, 10, or even 15 per cent in some areas

For Highland, where reserves are limited and savings options increasingly exhausted, the second option becomes harder to avoid.

Why This Hits Harder in Rural Scotland

Council tax rises are regressive by design, and their impact is felt most sharply in areas like Highland:

Incomes are lower on average

Transport and energy costs are higher

Public services are harder to replace privately

A uniform percentage increase does not affect households equally. In practice, it places a disproportionate burden on working households, pensioners and those on fixed incomes, many of whom are already grappling with the cost-of-living crisis.

The Bigger Question Nobody Wants to Answer

At heart, this is not just about council tax. It is about the sustainability of local government finance in Scotland.

For years, councils have been asked to deliver more with less, absorb inflationary shocks, and protect frontline services — all while being blamed locally for decisions shaped nationally. Council tax rises are becoming the visible symptom of a deeper problem that remains unresolved.

Next Tuesday’s Budget may determine the scale of the next increase. But unless there is a fundamental rethink of how councils are funded, the direction of travel is already clear.

For Highland and many other councils, the real question is no longer whether council tax will rise again but how high households can be pushed before the system finally breaks.

What This Means for a Band D Household

For a Band D household in Highland, council tax increases are no longer marginal.

A 7 per cent rise adds about £100 a year; a 10 per cent rise closer to £140.

These are political choices made in the context of constrained local funding. Repeated above-inflation rises shift the burden of fixing council finances onto households particularly in areas where incomes are lower and alternatives are limited.