Scots business chiefs’ concerns at growing tax gap with England

THE vast majority of company directors are worried about Scotland’s high tax rates compared with the rest of the UK, a survey has shown.

Research from the Institute of Directors (IoD) found that 82 per cent of business leaders expressed concern about further income tax divergence.

Their main worry was about the impact on recruitment, while other fears included the effect on an employee’s choice of location or on inward investment.

From next week, a 45p income tax band will be introduced on earnings above £75,000, while the top rate on earnings above £125,140 will rise by 1p to 48p.

The higher rate threshold will be frozen at £43,663 rather than rising in line with inflation, meaning thousands more people will be dragged into paying it.

Catherine McWilliam, nations director for Scotland at the IoD, said: ‘Recruitment and staff retention are key when business planning, and our data shows business leaders think that the introduction of the new tax band in Scotland will make things even more difficult for them.

‘Responses show that leaders clearly see Scotland’s tax regime as yet another barrier to attracting and retaining talent – and encouraging investment.’

In the IoD Scotland’s State of the Nation Directors Survey 2024, published yesterday, 74 per cent of respondents said personal tax was too high, while 71 per cent thought the same about business taxes.

Income tax policy divergence from the rest of the UK was a concern for 82 per cent, compared with only 14 per cent who said it was not a concern. Of those with a serious concern about tax divergence, 39 per cent highlighted a likely impact on hiring, 34 per cent choice of location for employees and 27 per cent investment.

Scottish Conservative finance spokesman Liz Smith said: ‘Widening the tax gap even further between ourselves and south of the Border is putting off investors, threatening jobs and harming our economic growth, which is already lagging behind our neighbours.

‘Humza Yousaf and the SNP must stop thinking high taxes are the only answer to plugging the black hole in Scotland’s finances that their own financial incompetence has created.’

A Scottish Government spokesman said: ‘Scotland’s tax policies carefully balance the need to raise revenues with the impact on taxpayers and the economy.’