Ahead of speculated tax hikes from this month’s Spring Statement and employment costs set to rise in April following the Autumn Budget, the figures reveal the alarming extent of financial strain on SMB owners as they navigate the potential hit on their profits and cash flow.

The data, which features survey responses from more than 500 UK SMB owners as well as 100 accountants and bookkeepers, ranks rising salary costs (43%) and tax liabilities (39%) in the top five worries for SMB owners’ cash flow. With nearly two-thirds (61%) of entrepreneurs citing cash flow issues as a source of significant stress, it is resulting in nearly half (44%) of SMB owners being kept up at night, highlighting the increasing pressure on SMBs in the current financial climate.

Speaking on the findings, Sabby Gill, CEO at Dext, says: “For SMB owners, cash flow is already a major pain point in even the most steady economic period but as the data indicates, the prospect of increasing labour costs is inflicting an unprecedented burden on entrepreneurs. With the Spring Statement approaching, we urge the Government to use this as an opportunity to introduce meaningful support for SMBs to successfully navigate already challenging conditions, rather than drive more change that will negatively impact growth.

“There’s a limited influence SMB owners hold over the fiscal shocks which may come their way this month however, they are in control of how they respond to them. Now more than ever, they must be proactive in planning for a host of different scenarios, leveraging every resource at their disposal – from real-time financial information to digital tools – to ensure they’re not only agile in their decision-making, but well-informed.”

From April 1, National Insurance (NI) contributions will rise by 1.2% with thresholds lowered from £9,100 to £5,000, however, businesses are also set to receive an increase in the employment allowance from £5,000 to £10,500. Alongside these changes, the national living wage will experience a 6.7% rise to £12.21 per hour as part of wider government policies to not only fill its estimated £40bn tax shortfall, but tackle the UK’s cost-of-living crisis. With the average salary bill for UK SMBs over £625,000 per annum, the new measures could result in an increase of nearly £42,0003 in annual employment costs for the average small business.

As businesses respond to these measures, a Q4 2024 poll from the Federation of Small Businesses (FSB) revealed a third (33%) of companies expect to reduce their workforces over rising staff costs – nearly double the figure from the previous quarter (17%). With forecasts in October 2024 from the Office for Budget Responsibility (OBR) suggesting progress made from the Autumn Budget for the government to reach its fiscal targets in 2029-30 have been erased, the upcoming Spring Statement could result in additional tax rises, further impacting confidence amongst businesses in the UK economy. 

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