Small Businesses across the Sheffield City Region have had to deal with new costs increases earlier this month, due to reporting requirements, financial hardship, indirect taxation and uncertainty around Brexit.
As Julian Pitts, regional managing partner for Begbies Traynor in Yorkshire, points out: “Small businesses are the lifeblood of the UK’s economy, accounting for 60 per cent of all employment in the private sector and almost 50 per cent of private sector turnover, so it is particularly worrying that the numbers of SMEs suffering financial distress are on the rise.”
Some of the issues facing small businesses from the start of the 2019 financial year include:
- Making Tax Digital
More than a million small businesses were hit with new reporting requirements due to Making Tax Digital (MTD) when it was introduced at the beginning of April. HMRC is forcing VAT-registered businesses to comply with its MTD initiative. The software required to meet MTD obligations alone is set to cost small firms £564 each on average.
- Increase in pensions
Small employers are also having to deal with a further increase in auto-enrolment pension contributions to at least three per cent. The increase in minimum contributions means an employer will now contribute £55 a month to the average UK employee’s pension pot, up from £37 according to Hargreaves Lansdown.
- Increase in National Living and Minimum Wage Rates
Increased wages also come with increased National Insurance Contributions (NICs) and income tax contributions for employers, as well as a higher amount needing to be placed into auto enrolment pension schemes. This increasing financial burden could see some already distressed businesses being pushed to breaking point, particularly if they are unprepared for the increases.
- Business Rates
Thousands of firms will have been landed with fresh business rates hikes as the third year of the current revaluation period started this month. The help won from government to support those hurt most by the 2017 revaluation is now falling away, leaving many small businesses with a 20 per cent hike to their bills plus an inflation-linked increase.
- Uncertainty around Brexit
The impact of continued political and economic uncertainty surrounding the ongoing Brexit negotiations cannot be underestimated.
- Raising finances
Smaller businesses that want to access external finance face a number of challenges. This includes a combination of weak appetite for, and low awareness of, alternative finance options, high borrowing costs and inadequate support for small firms that are turned down by banks.
All of these things have led to increases in the costs of running a small business.
For the first time since 2010, we saw a contraction in the size of the UK business community last year.
As a result, we are calling on the Government to support those impacted and rule out the introduction of fresh burdens that would exacerbate the loss even further.