Small businesses say they will raise prices if taxes are increased in the budget
- The Chancellor wants to increase employer national insurance contributions
Small businesses have warned they are likely to raise prices in response to higher taxes and the impact of new workers’ rights legislation.
Chancellor Rachel Reeves is likely to announce an increase in employers’ national insurance contributions in the autumn budget this week.
Employers currently pay national insurance at 13.8 per cent on an employee’s income above £175 per week, but this is expected to rise this week.
Budget tax raid: Small businesses warn that raising taxes will have a domino effect on customers
According to reports, the Treasury Department will also lower the threshold for when employers start paying the tax.
Experts have warned that a rise in employer contributions could reduce hiring, wages and pension contributions.
An increase in the NI for employers is also known as a ‘tax on jobs’ and could have a detrimental effect on business confidence. At the same time, the government is trying to make Britain an attractive place to invest.
An Enterprise Nation survey found that nearly half of small business leaders say a tax breach would hurt their business.
They say they may have to raise prices and suspend growth and hiring plans to cope with potential tax increases.
Recent employee rights legislation is also worrying some small businesses, despite 69 percent saying their employee benefits plans already meet legal requirements or higher.
The new rules offer employees protection against unfair dismissal and the right to wages in the event of illness from day one. Those on zero-hours contracts also get guaranteed working hours if they want them.
Nearly two-thirds of companies indicate that unfair dismissal on the first day is a particular concern. About 63 percent said this would have an effect on recruitment plans.
Furthermore, the looming threat that the 75 per cent business rates cut will not be extended from April is further exacerbating the problems, with 45 per cent fearing higher costs as a result.
Emma Jones, CBE, founder and CEO of Enterprise Nation, said: ‘To deal with some of the financial impact on small businesses, many will need additional support.
‘For example, higher operating costs associated with better worker rights could leave many with no choice but to increase their prices to customers – or seek efficiencies elsewhere. That could mean less investment in growth and fewer jobs.
“Small businesses are resilient in times of adversity, but they will need help rethinking their strategy to cope with the higher tax burden.”
Reeves will have her work cut out to inspire businesses after what is widely expected to be a dismal budget.
According to Lloyds Bank’s business barometer, business confidence fell to a four-month low in October – a significant drop from the nine-year high it reached in July and August.
The survey was conducted before news of a possible increase in networking, meaning the government could lose further business support.
However, Lloyds said 37 percent of businesses want to grow in the coming year, while hiring intentions remain unchanged.
Elsewhere, there are concerns that a change to capital gains tax (CGT) rules, including the removal of the asset sale exemption, would impact exit plans.
Just under a fifth said they were concerned about the impact on future investments, while 10 percent said it could affect their company’s valuation.
We’ve made sacrifices to grow our business – it’s only fair to expect an ‘end game’
Elsie Rutterford and Dominika Minarovic have recently secured investment for their skincare brand BYBI, but are concerned about the impact of changes to CBT.
Rutterford said: “It is fair to expect you to make money from the sale of your business, reflecting the years of sacrifice and hard work you have put into it.
“Since we started the business, we have both become mothers and we have both had to give up so much to run and grow the business. That’s on top of the years we spent putting our own money into it and receiving a meager salary while financing the growth ourselves.
“We did all this with the spirit that at some point there would be an endgame.
“If this continues, it will impact the number of people starting businesses and that will impact the economy.”
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