Small businesses say they will raise prices if taxes are increased in the budget

Small businesses have warned they are likely to increase 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 this week’s autumn budget.

Currently, employers pay National Insurance 13.8 per cent on a worker’s earnings over £175 a week, but this amount is expected to increase this week.

The Treasury will also lower the threshold for when employers start paying the tax, according to reports.

Experts have warned that an increase in employer contributions could reduce hiring, wages and pension contributions.

An increase in NI for employers has been called a “jobs tax” and could have a detrimental impact on business confidence, at the same time as the Government is trying to make the UK an attractive place to invest.

A survey by Enterprise Nation found that nearly half of small business leaders say a tax levy would hurt their businesses.

They say they may have to raise prices and suspend growth and hiring plans to deal with potential tax increases.

Recent legislation on workers’ rights also worries some small businesses, even though 69 per cent say their staff already meet legal requirements or higher.

The new rules will give employees protection against unfair dismissal and the right to sick pay from day one. Those on zero-hours contracts will also get guaranteed working hours if they wish.

Almost two-thirds of companies said first-day unfair dismissal was a particular concern. About 63 percent said it would have an effect on hiring plans.

Additionally, the looming threat that 75 per cent business rates relief will not be extended from April is adding to their woes, with 45 per cent fearing increased costs as a result.

Emma Jones, CBE, founder and chief executive of Enterprise Nation, said: ‘In order to manage some of the financial impacts ahead for small businesses, many will need additional support.

‘Rising trading costs associated with improving workers’ rights, for example, could mean that many will have no choice but to increase their prices to customers or look for efficiencies elsewhere. That could mean less investment in growth and fewer jobs.

“Small businesses are resilient in the face of adversity, but will need help to rethink their strategy to cope with a greater tax burden.”

Reeves will have his work cut out for him to inspire businesses after what is expected to be a bleak budget.

Business confidence fell to its lowest level in four months in October, according to Lloyds Bank’s business barometer, a significant drop from the nine-year high it hit in July and August.

The survey was carried out before news of a possible rise in NICs, meaning the Government could lose further support from businesses.

However, Lloyds said 37 per cent of businesses were looking to grow next year, with no change in hiring intentions.

Elsewhere, there are concerns that a change to capital gains tax (CGT) rules, including the removal of asset disposal relief, would affect exit plans.

Just under a fifth said they were worried about the effect on future investment, while 10 per cent said it could affect the valuation of their business.

We have made sacrifices to grow our business; it’s fair to expect an “endgame”

Elsie Rutterford and Dominika Minarovic recently secured investment for their skincare brand BYBI, but are concerned about the impact of the changes to CGT.

Rutterford said: “It’s fair to expect to make money from the sale of your business that reflects the years of sacrifice and hard work you put into it.”

‘Since starting the business we have both become mothers and we have both had to give up a lot to run and grow the business. That’s on top of the years we invested our own money in it and received a meager salary, while self-funding the growth.

‘We did all this in the spirit that at some point the end of the game would come.

“If this goes ahead it will have an impact on the number of people starting businesses and that will have an impact on the economy.”