"Tax Cuts" Measured in Pennies - How Little the Scottish Budget Really Saves Households

14th January 2026

The Scottish Government's latest Budget has been presented as delivering tax relief for low and middle earners. Ministers have highlighted increases in income tax thresholds as evidence that households will be better off.

Yet when the figures are examined in cash terms, the reality is far less dramatic. For most taxpayers, the much-trailed "tax cut" amounts to little more than loose change — a few pounds a month at best — raising questions about how meaningful the policy is in the context of ongoing cost-of-living pressures.

What the Budget Actually Changes

The key personal tax measure in the Budget is an increase in the basic and intermediate income tax thresholds. This prevents some fiscal drag by allowing people to earn slightly more before moving into higher tax bands. On paper, this is a progressive change that benefits lower and middle earners and avoids further erosion of take-home pay.

However, the scale of the increase matters. Independent analysis shows that the maximum cash saving for most people affected by the threshold changes is around £30 to £40 per year. That equates to roughly 60-75 pence per week — or the price of a supermarket carrier bag spread over seven days. Even at the median income level, the annual saving is typically no more than £40, assuming earnings sit comfortably within the affected bands.

The Reality for Households[b]

Put simply, these savings are small. In a year when households continue to face higher rents, energy bills, council tax, and food prices, a saving of a few dozen pounds does little to alter living standards. For many families, it will barely register in monthly budgets. The change may technically reduce tax liability compared with the previous system, but it is unlikely to be felt as meaningful “relief” by most people.

The cynicism is heightened by the way the policy is framed. By focusing on thresholds rather than headline rates, the Budget creates the impression of a substantial intervention while delivering only marginal cash benefits. The political messaging of tax cuts sits awkwardly alongside the lived experience of households who may save less over a year than the cost of a single weekly grocery shop.

[b]Winners, Losers, and Fiscal Drag

While lower earners see small gains, higher earners are largely excluded from the benefits. Thresholds for higher and additional rates remain frozen, meaning many middle-to-upper income households will pay more tax over time as wages rise. This “fiscal drag” quietly raises revenue and offsets the modest giveaways at the lower end of the income distribution.

As a result, the tax system becomes slightly more progressive, but not because lower earners receive significant help. Rather, it is because higher earners shoulder an increasing burden through frozen thresholds. The net effect is redistribution by stealth rather than through bold or transparent policy choices.

Optics Versus Impact

From a fiscal perspective, the modest scale of the savings is deliberate. Scotland operates under tight budget constraints, with limited borrowing powers and rising demands on public services. Large, visible tax cuts would require spending reductions elsewhere or higher borrowing. In that context, the government has chosen symbolism over substance: small, affordable changes that allow it to claim tax relief without materially weakening the public finances.

The problem is that symbolism does not pay bills. When savings are measured in tens of pounds per year, the gap between political rhetoric and economic reality becomes difficult to ignore. For many households, the Budget’s tax changes will feel less like a cut and more like a rounding error.

The Scottish Budget’s income tax changes do technically reduce tax liabilities for many people, but only by very small amounts. Typical savings of £30–£40 per year are unlikely to change behaviour, boost consumption, or meaningfully ease financial pressure. While the policy may score points for progressivity and fiscal caution, it falls far short of delivering noticeable relief to households.

In the end, the headline may say “tax cuts,” but the small print tells a different story: a Budget that offers pennies, not pounds, and relief that exists more on paper than in people’s pockets.