Small businesses brace for tax increases in April 2025

Small businesses in the UK are preparing for significant financial challenges starting in April 2025, a period some are calling "Awful April." Changes from the recent Autumn Budget will increase taxes and costs, putting a strain on many small firms. One of the most impactful changes is an increase in National Insurance contributions for employers. This rate will rise from 13.8% to 15%. Furthermore, the income threshold for paying these contributions will drop from £9,100 to £5,000, which means more businesses will have to pay higher taxes. To ease some of the burden, the government will increase the Employment Allowance from £5,000 to £10,000. This allowance helps offset National Insurance costs. However, many small business owners are concerned and may reduce their workforce or hold off on hiring new staff due to these changes. Another significant adjustment is the rise in the National Living Wage. Starting in April, the wage will increase by 6.7% to £12.21 per hour for workers over 21. This increase could lead to higher costs for businesses, particularly in sectors like hospitality still recovering from the pandemic. Additionally, starting from April, statutory sick pay and various parental leave payments will also see increases. While these measures are aimed at supporting workers, they add to the financial strain on small businesses. The capital gains tax will also rise from 10% to 14% for sellers of small businesses. This increase may discourage entrepreneurs from reinvesting in their businesses due to higher potential tax liabilities. One piece of good news is that the government will extend business rates relief for 2025/26, albeit at a lower level. This might help some small businesses cope with rising costs, but many still feel overwhelmed by the upcoming financial changes.