Scottish businesses warn tax burden threatens sustainable future as concerns hit five-year high
New research from the Institute of Directors Scotland shows 132% increase in tax concerns since 2021
Businesses across Scotland have warned of tax pressures threatening their long-term future, according to new research conducted by the Institute of Directors (IoD) Scotland.
The annual IoD State of the Nation Directors survey, now in its fifth year, asks cross-sector leaders for their views on key issues and opportunities shaping the business landscape. Since 2021, respondents’ concerns around business tax rates in Scotland have risen by 132%. Five years ago, only 28% of leaders noted business tax rates as a concern; in 2026 that number increased to 65%.
Scotland’s income tax rates are putting additional pressure on businesses, with 71% of the 2026 respondents expressing the view that they are too high. Meanwhile, 41% said recent changes to employer National Insurance have significantly impacted their organisation.
Tax divergence remains a worry for the majority (74.8%) of those surveyed this year, with respondents noting the disparity between taxation in Scotland compared to the rest of the UK will seriously impact their abilities to attract investment and hire the necessary skilled workers.
The 2024 State of the Nation Directors survey highlighted tax as the fifth policy priority for business leaders, whereas today’s results show tax at the top of the list. With the upcoming election on the horizon, respondents called for the future Scottish Government to “reduce the rates burden and address tax disparities that are hindering investment, growth, scaling and skills retention”.
Catherine McWilliam, Nations Director at IoD Scotland, said the incoming government needs to work alongside the UK Government to implement support measures for Scottish businesses that will alleviate these concerns.
She said: “Over the past five years, Scottish businesses have shown remarkable resilience. From the focus on employment in 2021 following the Covid-19 pandemic, to prioritising skills retention and accelerating growth, business leaders are now moving beyond recovery and turning to investment and scaling ambitions.
“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. If we want to unlock our economic growth potential, businesses need stability and long-term policy certainty.
“While we welcome the support measures included in the recent Scottish Budget, they do not go far enough, particularly for businesses outside the retail, hospitality and leisure sectors. 72% of our members surveyed said the budget did not reflect Scotland’s priorities, emphasising the need to implement concrete support measures, such as the Scottish Government’s 2021 Framework for Tax, to alleviate cost pressures and allow businesses to flourish.”
Beyond tax concerns, the 2026 survey showed a significant surge in AI adoption. Prior to 2024, AI was not on the radar for Scottish business leaders. However, this year 75% say they are using AI for business operations with nearly all of those surveyed (92.68%) predicting its use will grow further in the coming years.
As AI becomes more embedded in Scottish organisations, cybersecurity has become the second highest priority for business leaders.
Catherine McWilliam said: “It’s encouraging to see businesses prioritising robust cybersecurity systems and practices, particularly as organisations rapidly adopt AI. With innovation moving at such pace, cyber and AI best practice and governance are essential.
“82% of our members have undertaken CPD over the past three years, showing a real commitment to continuous learning and adapting to new innovations and ways of working. Investment in professional development is key at a time where business operations and skills needs are evolving.
“I’d like to thank all of our members who took the time to complete our State of the Nation surveys over the last five years. The insights shared have given us a clearer picture of the challenges and opportunities facing businesses across Scotland and are invaluable in helping us drive change at Government level in a bid to grow and strengthen Scotland’s economy.”
The 2026 State of the Nation Directors survey was open to responses from members of the Institute of Directors in Scotland from 14 January 2026 until 2 March 2026. In that time 123 directors responded to the survey. No responses were disqualified from inclusion.
