One in five SMEs cut staff due to rising taxes and costs – Rathbones

One in five small and medium sized enterprises (SMEs) cut staff last year as rising tax and costs hit businesses, research from Rathbones found.

21% of SME founders said they had to make redundancies, with cost pressures like business rates and national insurance among the reasons. 

70% said rising costs were their biggest threat, and 58% said tax or regulation was also a major concern.

Over one in four reported that more than 25% of their personal wealth is tied up in their business. 

Faye Church, senior financial planning director at Rathbones, said: “We consistently hear from business owner clients across the UK that they are determined to grow, hire and contribute to the wider economy. 

“But heightened tax pressures are increasingly stifling those ambitions. 

“Entrepreneurs are being squeezed from both sides — higher taxes at the business level and rising personal tax bills. 

“This double whammy makes it extremely difficult to plan, invest and build for the future.”

Church added: “For most entrepreneurs, the line between business and personal finances is incredibly thin. 

“Tax changes at either level can have an immediate impact on household income, retirement planning and long-term investment goals. 

“That’s why it’s essential to consider business planning and personal financial planning together, rather than in isolation – particularly in a tax environment that is becoming more complex and less predictable.”

9% of SME leaders said they have increased use of freelancers or contractors, and another 9% have moved towards more part-time or flexible roles. 

62% said the Government does not understand the needs of entrepreneurs. 

Over half said relief measures like business rates or employer national insurance changes would help growth and investment.

35% of hospitality SMEs said they made redundancies, well above the average. 69% said tax or regulation is now one of their main threats. 

Church said: “Calls from the hospitality sector for targeted relief highlight the increasingly painful pressures facing these businesses. 

“Without action, the mounting tax and cost burden risks stifling the very growth, innovation and local regeneration the UK economy urgently needs – particularly from a sector that employs so many and contributes so much to communities nationwide.”