More than three-quarters of small and medium-sized businesses (SMEs) in the UK are putting major life decisions on hold due to tax worries – including having children or moving home, new research suggests, reports BritPanorama.
It is widely known that small businesses are struggling with multiple factors that make it hard to generate a profit at the moment. From high fuel and energy costs to rising interest rates and weak consumer confidence, making more money than is spent to run the business is increasingly challenging.
One particularly frustrating impediment continues to be the tax burden. While the government has limited ability to tackle many of these headwinds, tax rates remain directly under their control. Data from Money.co.uk reveals that uncertainty regarding taxation is leaving lasting impacts on personal and business decisions.
Life put on hold
Researchers spoke to 500 SME firms, finding that over three-quarters (77 per cent) have delayed personal financial decisions, such as buying a house, having children, or retirement planning, due to “Budget uncertainty.” This refers specifically to taxation changes resulting from a Budget, which can affect a firm’s profitability and operational viability.
Recent Budgets have not favoured small businesses, with rising employer National Insurance being the most problematic aspect. Issues surrounding fuel duty and business rates further complicate the landscape.
The uncertainty surrounding taxation has direct implications for the health of SMEs, with repercussions for the owners’ personal lives. Major financial commitments like having children and purchasing homes necessitate a clear understanding of future prospects, which many SME owners currently lack.
Tom Luth, CEO of Money.co.uk, commented: “This is bigger than business; it’s people’s lives on hold. Budget anxiety isn’t confined to the workplace for small business owners; it’s keeping people up at night and delaying real, personal decisions like buying a home or starting a family.”
Business closure fears
Concerns over taxation run deep, with two in three SMEs (65 per cent) fearing that a rise in business taxes could compel their operations to shut down within the next year. For firms barely managing to stay afloat, higher tax liabilities could push them into the red.
Given that most businesses rely on borrowing to some extent, elevated interest rates compared to the pre-pandemic era exacerbate the risk of tax increases precipitating defaults and bankruptcies.
“Nearly two-thirds are worried that a tax rise this Budget could put them out of business, and that’s a significant level of concern for the chancellor to be aware of,” noted Luth. “It’s clear from the survey that if taxes rise, business owners expect to have to respond to keep their heads above water, through raising prices, pausing growth, and not taking on new staff – which will have knock-on consequences for the wider economy, not just the businesses themselves.”
More than half of firms will raise prices
The survey also indicated that 45 per cent of UK small business owners feel anxious or dread the upcoming Budget, contrasting sharply with the 22 per cent who are optimistic. Additionally, three in five (60 per cent) reported experiencing stress, with nearly one in four (23 per cent) losing sleep over Budget speculation.
If tax rates on SMEs increase again, over half (57 per cent) of business owners stated they would raise prices for customers. Furthermore, 39 per cent would pause growth or expansion plans, while 29 per cent would refrain from hiring new staff, at a time when the jobs market is already exhibiting signs of strain.
Energy and utility bills currently represent the most substantial cost pressure on SMEs, reported by over half (54 per cent) of SME owners. To alleviate potential financial burdens, business owners primarily desire reductions in energy costs (17 per cent) and an overhaul of business rates (17 per cent) in the Budget, surpassing preferences for a freeze or cut in corporation tax (14 per cent) or lower employer National Insurance contributions (13 per cent).
As SMEs navigate these complex challenges, the implications for both business viability and personal decisions weigh heavily on many owners.
