Small companies put together for Awful April as National Insurance and minimal wage adjustments chew

Households are bracing themselves for bill hikes across the board starting next month, with energy, water and council tax all set for huge increases.

While Awful April is set to affect millions of households, small businesses are also preparing themselves for much bigger bills. 

In the Autumn Budget, the Chancellor focused on improving growth and investment in the economy but that cash has to come from somewhere.

And small businesses are set to bear a heavy burden, with changes to National Insurance, minimum wage and other taxes. Below, we run through the changes. 

1. National Insurance contributions

One of the biggest changes for small businesses will be an increase in National Insurance contributions, from 13.8 per cent to 15 per cent in April.

The threshold at which it is paid has also been slashed from £9,100 a year to £5,000 from next year.

At the same time, the Government is increasing the Employment Allowance from £5,000 to £10,000 and removing the £100,000 threshold, meaning all employers will be eligible.

It represents a steep increase in the amount businesses will now have to pay and surveys suggest it has already put some business owners off from taking on additional staff.

A poll by the Federation of Small Businesses at the end of 2024 found that 33 per cent of small employers expect to reduce headcount, up from 17 per cent in the previous quarter as a result of tax changes.

At the same time, the number of firms hiring is down from 14 to 10 per cent, while 56 per cent expect to keep their workforce the same.

To offset some of the impact of rising NIC costs, the employment allowance will increase from £5,000 to £10,000 from 6 April. 

Previously, it was only available to businesses with a prior tax year NIC liability of £100,000 or less but this will be removed.

Emma Jones, CBE, founder and chief executive of Enterprise Nation, said: ‘Small employers are facing the prospect of reduced profits next month as changes to National Insurance, the National Living Wage and Business Rates Relief kick in on 1 April.

‘We know many of our members have already made the decision to raise prices and carefully restructure their growth plans.

‘While it’s unlikely we’ll see much movement in the spring forecast to improve these key tax measures, we think there could be room for the Chancellor to fine-tune the impact on those hit the hardest by increasing the Employment Allowance for independent high street retailers and hospitality for example who face a double whammy with a reduction in Business Rates Relief.’

2. Increase to minimum wage

An increase in the living wage will also add to labour costs for small businesses. 

Reeves announced that the National Living Wage will increase by 6.7 per cent to £12.21 per hour for over-21s and £10 for 18-21 year olds from next April.

While good news for employees, it only adds to the pain for businesses still struggling to recover from the pandemic, particularly in hospitality.

Hospitality businesses have warned that the changes paired with the increase in NICs will lead to widespread job losses and closures, which in turn will feed through to higher prices.

3. Statutory sick pay

The Employment Rights Bill will also introduce wide-ranging changes to how small businesses operate, including changes to unfair dismissal.

Before that though, other changes will be introduced to better compensate employees.

From 6 April, statutory sick pay rates will increase from £116.75 to £118.75 per week, while statutory payments for maternity, paternity, adoption, shared parental leave and bereavement leave will increase from £184.03 to £187.18 per week.

The earnings threshold required for employees to qualify for these rates will increase from £123 to £125 per week, while maternity allowance will stay at £30 per week.

4. Capital gains tax

Capital gains tax (CGT) rates for business disposal will rise from 10 to 14 per cent in April, and match the lower rate of 18 per cent by 6 April 2026.

While the increase isn’t as high as some businesses had expected, some experts have warned the changes could reduce the incentive for business owners to continue to grow.

CGT has historically been charged at lower rates than income tax to reward entrepreneurs for the risk taken to start and grow their business.

The relief limit will also be capped at £1million but the increase in the CGT rate could mean an increased bill of up to £80,000 for those planning to sell their businesses after April 2025, according to PwC.

5. HMRC interest rates to rise

From 6 April, the interest rate HMRC charges on unpaid taxes will increase by 1.5 percentage points.

It means that, assuming the Bank of England keeps rates at 4.5 per cent on Thursday, the interest rate for most unpaid taxes will increase from 7 to 8.5 per cent.

And some better news…

There is some good news coming for small businesses, with the much-debated business rates relief set to be extended, albeit at a lower level.

Reeves announced an extension of business rates for 2025/26 and pledged to permanently lower business rate multipliers for retail, hospitality and leisure properties from 2026/27.

Labour will also freeze the small business multiplier and provide 40 per cent relief on bills for these properties, up to £110,000.

While the extension will be welcomed by small firms crippled by rising costs, some will feel that they do little to offset the huge financial burden that is around the corner.