Angus CochraneBBC Scotland

Reuters Rachel Reeves, who has brown shoulder-length hair, stands on Downing Street turned to her right, towards the camera. She is wearing a blue jacket and white scarf. Reuters

Chancellor Rachel Reeves announcer the UK Budget in the House of Commons

Scotland will receive an extra £820m over the next three years as a result of the UK Budget, Chancellor Rachel Reeves has announced.

The Labour minister also pledged to scrap the the two-child benefits cap for Universal Credit claimants.

However, her plans will lead to more Scots paying income tax and National Insurance, as well as introducing levies on pension contributions.

Ahead of the Budget, the Scottish government had urged the chancellor to invest in public services and support people with the cost of living.

Announcing the extra funding for the Scottish government, Reeves said: “The benefits of investment and growth must be built and felt in every part of the United Kingdom.”

She described her tax changes as “pragmatic”.

Labour ministers are also set to loosen rules on new oil and gas exploration in the North Sea.

While some of the tax and spending decisions in the UK Budget do not directly affect Scotland – which has control in devolved areas such as health and education – many of the measures do.

The announcements that directly impact Scots include:

Extending a freeze on National Insurance thresholds for an extra three years beyond 2028Cuts to green levies on energy bills to bring down household energy bills The removal of a National Insurance exemption for salary-sacrificed pension contributions above an annual £2,000 threshold, from April 2029A freeze on fuel duty to be extended until September 2026A new mileage-based charge on electric and plug-in hybrid cars from April 2028

Ahead of the Budget, the chancellor had already announced an increase in the minimum wage for younger workers and an extension of the sugar tax – both of which apply across the UK.

Income tax freeze – and how it affects Scots

Reeves announced that a freeze on UK income tax thresholds will be extended until 2030.

Scotland sets its own income tax rates, but changes to thresholds do have an impact north of the border.

Holyrood ministers have used their devolved powers to set up a distinct system, with seven bands to the UK’s four.

Proposed income tax bands in Scotland - Starter rate £12,571 - £15,397 - 19% Basic rate £15,398 - £27,491 - 20% Intermediate rate £27,492 - £43,662 - 21% Higher rate £43,663 - £75,000 - 42% Advanced rate £75,001 - £125,140 - 45% Top rate Over £125,140 -48%

The Scottish government is in charge of setting the thresholds for all of these bands except for the lowest one, the personal allowance, which is the level at which people start paying tax.

Extending the freeze on this threshold means that as salaries rise over time, more people reach an income level at which they start paying tax.

As well as directly affecting the take-home pay of Scots through the personal allowance, the change will also lead to an automatic deduction from the block grant that the Treasury pays to the Scottish government.

This is because the UK government is able to deduct funds from the block grant that it estimates it would have received if tax-raising powers were not devolved to Holyrood.

Frozen thresholds mean more taxpayers paying higher rates in other parts of the UK, and a higher theoretical tax take for the UK government in Scotland – and therefore a bigger deduction from the block grant.

Getty Images Stock image of a woman with her back to the camera looking at two children on swings. Getty Images

The Scottish government says the move will lead to 20,000 fewer children living in relative poverty

Another of the key Budget announcements was on the two-child benefits cap, which means that parents can only claim Universal Credit or tax credits for their first two children, with a few exemptions.

Reeves confirmed that the cap on Universal Credit would be lifted from April.

Introduced by the Conservative party to cut costs, the cap has so far been kept in place by Sir Keir Starmer’s Labour administration.

The Scottish government has pledged to mitigate the cap north of the border by offering a new benefit – the Two-Child Limit Payment – to affected families from March next year.

The UK government’s decision to scrap the cap is expected to save the Scottish government about £155m in the next financial year.

However, the Fraser of Allander Institute, an independent economic research unit at the University of Strathclyde, has estimated that scrapping the cap could cost the Scottish government an additional £34m in 2026-27 because it would mean more people were eligible for devolved benefits.

Taken together, that would leave Holyrood with a saving of £121m.

First Minister John Swinney has pledged to use any savings from the removal of the cap to tackle child poverty.

When is the Scottish Budget?

The block grant paid to the Scottish government by the UK Treasury is adjusted relative to what is spent on devolved services like health and education in England.

The calculation to decide Scotland’s share is based on population and some other factors.

The Scottish government will announce its own tax and spending plans on 13 January – a month later than usual because the UK Budget was pushed back to November.

Coming just four months before May’s Holyrood election, it is expected to be a key staging post in the battle for votes.