SLE issues stark warning over property income tax threat to rural homes and jobs

Press Release

Scottish Land & Estates (SLE) has issued a stark warning that a Property Income Tax could deepen Scotland’s rural housing crisis, threaten jobs and undermine investment in businesses that sustain countryside communities.

The warning follows the UK Budget announcement that rental profits for taxpayers in the rest of the UK will be taxed at 24%, 44% and 49% from April 2027 – four percentage points above the main UK Income Tax rates. 

The increases do not automatically apply to Scottish taxpayers, whose rental profits remain subject to Scottish Income Tax rates. However, the Scottish Government has the power to set separate rates for property income and is considering its approach ahead of its forthcoming Budget in December.

In a letter sent to Housing Secretary Shirley-Anne Somerville and Business Secretary Stephen Flynn, SLE has called for the Scottish Government to undertake a full Rural Impact Assessment before considering any changes - and to demonstrate that any additional revenue would outweigh the wider costs to housing provision, employment and economic growth.

SLE warns that the measure could affect a wide range of activities across farms, estates and other rural enterprises, including rented housing, visitor accommodation, commercial premises and agreements supporting renewable energy and telecoms infrastructure. It says additional taxation risks accelerating the withdrawal of rural rented homes at a time when providers already face rising maintenance costs, regulatory pressures and substantial investment requirements. Higher costs could also be passed on through increased rents, worsening affordability for households and business tenants.

Anna Gardiner, Senior Policy Advisor (Business & Property) at Scottish Land & Estates, said: “Property Income Tax carries serious risks for rural Scotland. It could leave communities with fewer homes to rent, businesses with less money to invest and jobs under threat.

“Many Scottish taxpayers already pay more Income Tax than people earning the same amount elsewhere in the UK. A further tax on property income would add to the pressure on rural businesses and housing providers.

“Rural rented housing is essential to the functioning of local economies. Families need somewhere to live, employers need homes for their workforce and public services need to attract and retain staff. Another financial burden on housing provision could have consequences far beyond the individual property owner.

“For many farms and estates, rental income supports the viability of the wider business. When the sums cease to add up, housing providers can leave the rented sector and the people who depend on them are left with even fewer options.”

The rural organisation has also highlighted the potential impact on diversification, which successive governments have encouraged rural businesses to pursue. Income from letting converted farm buildings, providing holiday accommodation or making land available for infrastructure can support employment and investment that agricultural income alone would struggle to sustain. SLE warns that reducing those returns could deter new projects and leave existing businesses with less capacity to retain staff or expand.

Family businesses operating as sole traders or partnerships could be particularly exposed because their income is generally taxed through the Income Tax system. SLE said there was a real risk of creating a greater burden for these businesses than for incorporated enterprises carrying out similar activities.

Anna added: “Farming families and rural businesses have been encouraged to diversify, create jobs, provide housing and support renewable energy. Ministers must recognise how much of that activity depends on income which falls within the property tax system.

“Taking more money out of these enterprises could undermine the very investment and economic activity that government wants to encourage. The effects would reach local tradespeople, suppliers, employees and tenants.

“We recognise the pressures on Scotland’s public finances – but Ministers must also account for the cost of homes lost from the rented sector, investment that does not happen and employment that can no longer be sustained.

“The Scottish Government should undertake a full Rural Impact Assessment and examine alternative ways of raising revenue with fewer risks to rural communities. The wider economic and social consequences must be thought through when assessing the benefits of any potential change.”