Scottish Business Leaders Sound Alarm Over High Taxes and UK Divergence
A damning new survey has exposed deep-seated concerns among Scottish company directors regarding the nation's tax policies, with nearly three-quarters warning that high income tax rates and divergence from the rest of the UK are stifling economic growth.
Tax Burdens Top Business Concerns
The Institute of Directors' 2026 State of the Nation report reveals that 72% of industry leaders believe personal tax rates in Scotland are excessively high. This marks a significant shift in priorities, as tax has surged from the fifth-top concern just two years ago to become the foremost policy issue for business leaders today.
Furthermore, the survey highlights that 75% of directors are worried about income tax divergence between Scotland and other parts of the UK. Detailed analysis shows that 43% rate this divergence as a serious concern, while 31% view it as a slight concern, leaving only 25% unconcerned.
Business Rates and National Insurance Pressures
The report also indicates a dramatic increase in anxiety over business rates. The proportion of company bosses citing business rates as a major concern has more than doubled in recent years, rising from 28% in 2021 to 65% in the current survey.
In addition, a staggering 81% of respondents believe that higher employer national insurance contributions would negatively impact their operations, compounding the financial strain on Scottish enterprises.
Financial Implications of Tax Divergence
The latest Budget decisions mean that from the start of next month, all individuals earning more than £33,493 will pay higher income tax in Scotland compared to other UK regions. Specific examples illustrate the disparity:
- An annual salary of £45,000 incurs £396 more in tax.
- At £50,000, the additional tax rises to £1,496.
- For £80,000 earners, the extra burden is £2,300.
- Those on £130,000 face £5,331 more, while individuals earning £800,000 pay an astonishing £25,431 extra.
Voices from the Business Community
Catherine McWilliam, nations director at IoD Scotland, commented: 'Over the past five years, Scottish businesses have shown remarkable resilience. However, members tell us that ongoing tax burdens are hindering acceleration, inward investment, and skills retention, which leaves Scotland at risk of falling behind the rest of the UK.'
She added: 'If we want to unlock our economic growth potential, businesses need stability and long-term policy certainty. While we welcome the support measures in the recent Scottish Budget, they do not go far enough, particularly for businesses outside the retail, hospitality, and leisure sectors.'
McWilliam noted that 72% of surveyed members felt the budget did not reflect Scotland's priorities, emphasising the need for concrete support measures like the Scottish Government's 2021 Framework for Tax to alleviate cost pressures.
Political Reactions and Broader Concerns
Scottish Conservative business spokesman Murdo Fraser stated: 'This is just the latest siren warning from business that the SNP's economically illiterate approach is threatening growth, investment, and jobs. John Swinney's punitive tax regime makes it harder to attract firms and skilled workers – and Scotland is falling behind the rest of the UK as a result.'
In response, Finance Secretary Shona Robison defended the government's stance: 'Thanks to decisions taken by this government, 55% of taxpayers in Scotland can expect to pay less income tax than in the rest of the UK in 2026-27.'
Additional Survey Findings
The IoD survey, conducted over January and February as the SNP's Budget progressed through parliament, uncovered several other key issues:
- 65% of directors felt business taxes were too high.
- 59% believe Scotland has too many local authorities.
- When asked about infrastructure investment, 29% prioritised roads and transport, 20% energy, and 17% healthcare facilities.
- 65% had a negative impression of the latest UK Government Budget, with 72% stating it did not reflect Scotland's priorities.
Beyond tax, business leaders ranked cybersecurity, employment, entrepreneurialism, and infrastructure alongside science, innovation, and technology as top policy priorities for the next five years.
This comprehensive survey underscores a growing consensus among Scottish business leaders that current tax policies are jeopardising the nation's economic competitiveness and future prosperity.
