Scottish Accountants Say Income Tax and NI Are Broken — And Nearly 40% Want Them Fixed First

The first post-election poll of ICAS members has landed, and the message from Scotland's chartered accountants is unambiguous: Income Tax and National Insurance need urgent reform, and everything else can wait. For Scottish SME owners managing payroll and planning for growth, this is the professional consensus that should be informing your conversations with your accountant right now.

Thirty-nine percent of ICAS members — the Institute of Chartered Accountants of Scotland — have identified Income Tax and National Insurance as the taxes most urgently requiring reform, according to new polling conducted in the wake of the Scottish Parliament election. That figure is more than double the 17% who pointed to Non-Domestic Rates, which has historically dominated Scottish business tax complaints. When the people who spend their working lives inside Scotland's tax system tell you something is broken, it is worth listening.

The timing matters. Scotland already operates a divergent Income Tax regime from the rest of the UK, with higher rates applying to earnings above £43,662 — a threshold that hasn't kept pace with wage inflation and now catches a growing number of skilled workers who would not consider themselves high earners. According to the Scottish Government's own tax policy documentation, around 500,000 Scottish taxpayers pay the higher or top rates, a figure that has risen sharply as public sector pay deals have pushed more workers across the threshold. That is a lot of people — and a lot of employers — affected.

National Insurance compounds the picture. The 2025 UK Budget's decision to raise employer NI contributions from 13.8% to 15%, combined with a lowered secondary threshold, landed hard on small businesses. The Federation of Small Businesses Scotland estimated the change would cost Scottish SMEs an average of £3,000 to £5,000 per employee per year in additional liability, depending on pay levels and headcount. For a ten-person firm in Edinburgh, that is not a rounding error — it is a hiring decision, a pay review, or an investment in kit that simply doesn't happen.

The ICAS poll reflects a structural frustration that has been building for years. The Scottish Parliament has limited powers over National Insurance, which remains reserved to Westminster, meaning any meaningful NI reform requires UK Government action. That asymmetry is precisely why Scottish businesses feel caught: Holyrood can adjust Income Tax bands but cannot touch the employer NI burden that is quietly squeezing margins. As ICAS has consistently argued in its pre-budget submissions, the interaction between Scottish Income Tax policy and UK-wide NI thresholds creates compounding distortions that hit Scottish workers and employers harder than their English counterparts.

The practical upshot for Scottish SME owners is that this isn't abstract policy noise — it is your wage bill, your ability to recruit, and your net take-home if you pay yourself a salary. With a Scottish Budget expected in the autumn and Westminster under growing pressure to revisit its NI changes following pushback from business groups including the British Chambers of Commerce and the Confederation of British Industry Scotland, the next twelve months could see genuine movement. The ICAS poll gives professional weight to the case for reform, and that is the kind of evidence that moves policy conversations, slowly but surely.