The start of a year is always good time to look ahead at what tax and financial changes will take effect over the coming months. For SMEs there are a number of changes in 2025 which could have an impact on operations and which it makes sense to plan for.
Increase in National Minimum Wage
The Autumn Budget announced that from April 2025 there would be an increase in the National Minimum Wage. The National Living Wage, paid to workers over 21, will rise to £12.21 an hour from £11.44. Younger workers aged between 18 and 20 will see their pay rise to £10 an hour from £8.60 whilst 16 and 17 year olds will see an increase from £6.40 to £7.55. The Government’s aim is to phase in a single adult rate for minimum pay, and these changes are a clear indication of their direction of travel. In addition, employers who voluntarily pay the Real Living Wage will see rates rise from £12 to £12.60 outside London and £13.15 to £13.85 in the capital. The impact on businesses, and particularly SMEs, could be significant as a result of these increased labour costs. If you employ staff it might be useful to run some cost analysis ahead of the changes, and consider working patterns or whether other aspects – such as increasing prices – need to be considered.
Changes to Employers National insurance
As well as an increase in wages, employers will also be hit by an increase in National Insurance Contributions (NICs) in April. The primary rate will increase by to 15% from 13.8% from the start of the new tax year. Class 1A and Class 1B employer rates will also increase at the same time. In addition, the threshold at which employers start to pay NICs will be reduced to £5,000 from £9,100. These changes put additional pressure on SMEs when it comes to staff costs.
Reduction in business rates relief
Various sectors including retail, hospitality and leisure will face increased business rates from the beginning of April. At the moment these sectors enjoy a discount of 75% but this will drop to 40% from April. This means that many businesses will see their rates bills almost double. Coupled with the rise in employee costs this could have a significant effect for SMEs in hospitality and retail.
Planning ahead
As always one of the key steps to success as a SME is working closely with your accountant. By providing professional advisors with information in a timely fashion, it’s easier to spot potential issues and plan ahead for them. As with any aspect of life, advice can be more helpful when there’s time to think through the implications – rather than considering issues at the last minute!