Scottish firms are facing a huge rise in tax bills and costs after a radical Budget designed by Chancellor Rachel Reeves to restore the UK’s battered public finances.

Companies across a range of sectors will be forced to pay hundreds of millions of pounds more in tax after Ms Reeves announced long-trailed plans to hike employer national insurance contributions, with further cost increases in the pipeline from a 6.7% rise in national living wage to £12.21 an hour next year.

And there was anger from the Scotch whisky industry as the Chancellor said spirits duty will rise in line with retail price index inflation from February, although beer duty was cut by a “penny a pint”.

Ms Reeves drew fierce criticism from the Opposition benches from a Budget she said was necessary to address a “black hole” in the public finances and position the UK for growth following 14 years of Tory rule.

The Chancellor’s Budget has sought to raise £40 billion from extra taxes to “rebuild Britain”, £25bn of which will come from a 1.2 percentage point rise in national employer national insurance contributions to 15%. This came alongside a reduction in the secondary threshold at which firms pay contributions on each salary to £5,000 from £9,100. However, an increase in the employment allowance from £5,000 to £10,500 was welcomed by the Federation of Small Businesses (FSB) Scotland, which it said will “shield the smallest employers from the jobs tax”.

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Mags Simpson, interim director of CBI (Confederation of British Industry) Scotland, branded it a “tough Budget for business”. She noted: “While the corporation tax roadmap will help create much needed stability, the hike in national insurance contributions alongside other increases to the employer cost base will increase the burden on business and hit the ability to invest and ultimately make it more expensive to hire people or give pay rises.”

The Scottish Retail Consortium said retailers are facing a £190m hike in their tax bills following the changes to national insurance contributions.

“Combined with increases in the statutory wage rates it’s clear retail businesses will see big rises in the cost of employment, whilst there was little sign of any significant reform to non-domestic rates,” said SRC director David Lonsdale. “Such stark increases will increase the cost of operating a retail business and are unlikely to be absorbed by businesses, at a time when Scottish retail sales are flatlining, making it likely those costs will be passed along to consumers.”

There was disappointment from the hospitality industry too. The Scottish Licensed Trade Association said the extra costs will “restrict investment, restrict growth, and increase the risk of job losses”. “As a staff-intensive sector, many in the licensed hospitality industry will now be questioning whether or not they can even maintain their current staffing levels,” added SLTA managing director Colin Wilkinson.

UKHospitality Scotland made similar points as it responded to an “extremely tough Budget for our businesses, with employer NIC increases set to significantly impact their finances, alongside higher than expected rises in the national living wage and national minimum wage”.

With the Chancellor providing 40% relief from business rates for hospitality, retail and leisure in England for 2025/ 2026, building on the 75% relief that has been in place over the last two years, UKHospitality added it was now “imperative” the Scottish Government provides similar support at is Budget in December.

Director Leon Thompson said: “The lack of support in the last two years has left Scottish hospitality businesses in a precarious situation. Our businesses have been forced to trade at a considerable disadvantage to their counterparts in England and Wales. It’s time for the Scottish Government to use the money it will receive from rates relief in England to support Scottish hospitality."

The Scotch whisky industry meanwhile launched a stinging attack on Prime Minister Sir Keir Starmer after the hike in spirits duty.

The Scotch Whisky Association (SWA) accused Sir Keir of breaking a promise to the industry after Ms Reeves declared duty on non-draught alcoholic products will increase in line with retail price index (RPI) inflation from February, while beer duty was cut by 1.7% or a “penny off a pint”.

The SWA, which over recent weeks has been highlighting the damaging effect that last year’s 10.1% rise in duty has had on jobs and investment, said the decision came just a year after the Prime Minister said he would back “Scotch producers to the hilt”.

Chief executive Mark Kent said: “This duty increase on Scotch whisky is a hammer blow, runs counter to the Prime Minister’s commitment to ‘back Scotch producers to the hilt’ and increases the tax discrimination of Scotland’s national drink,” he said.

“On the back of the 10.1% duty increase last year, which led to a reduction in revenue for HM Treasury, this tax hike serves no economic purpose. It will damage the Scotch whisky industry, the Scottish economy, and undermines Labour’s commitment to promote ‘Brand Scotland’.

Mr Kent’s comments were echoed by Diageo, one of Scotland's biggest Scotch whisky producers. Nuno Teles, managing director of Diageo GB, declared the duty rise “will leave a bitter taste for drinkers and pubs while jeopardising jobs an investment across Scotland”.