Three-quarters of small business owners delay having kids or buying houses over tax fears

More than three-quarters of small and medium-sized businesses (SMEs) in the UK are putting major life decisions on hold due to tax worries - including having children or moving home, new research suggests.

It is widely known that small businesses are struggling with multiple factors that make it hard to generate a profit at the moment.

From high fuel and energy costs, to rising interest rates and weak consumer confidence, making more money than you spend to run the business is not easy.

One particularly frustrating impediment is the tax burden.

While the government only has limited ability to tackle many of the headwinds, tax rates are directly in their control.

And data from Money.co.uk shows some startling findings due to the toll of uncertainty.

Life put on hold

Researchers spoke to 500 SME firms and found over three-quarters (77 per cent) have delayed a personal financial decision, such as buying a house, having children or retirement planning, because of “Budget uncertainty”.

This refers more specifically to the taxation changes that result from a Budget, which can impact a firm’s profitability or ongoing ability to function.

Recent Budgets have not been favourable to small businesses, with employer National Insurance rises being the most unhelpful aspect. Fuel duty and business rates are problems too.

The uncertainty around taxation has direct implications for the health of SMEs, and this clearly has a knock-on effect on life decisions for the people who own them. Having children and buying a house both have large financial implications, and are not always easy things progress with without a clear understanding of future prospects.

Tom Luth, CEO of Money.co.uk said: “This is bigger than business; it’s people’s lives on hold. Budget anxiety isn't confined to the workplace for small business owners, it's keeping people up at night and delaying real, personal decisions like buying a home or starting a family.”

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Business closure fears

Two in three SMEs (65 per cent) are concerned that a rise in business taxes could force their firm to close within the next 12 months, the researchers found.

For companies only just above water, further tax rises could tip them over the thin line between profit and loss.

Most businesses borrow money to some degree, and with interest rates still at elevated levels compared to the pre-pandemic era, additional taxes could prompt defaults and ultimately bankruptcies.

“Nearly two-thirds are worried that a tax rise this Budget could put them out of business, and that's a significant level of concern for the chancellor to be aware of,” said Luth.

“It’s clear from the survey that if taxes rise, business owners expect to have to respond to keep their heads above water, through raising prices, pausing growth, and not taking on new staff - which will have knock-on consequences for the wider economy, not just the businesses themselves.”

More than half of firms will raise prices

The researchers also found 45 per cent of UK small business owners describe themselves as anxious or actively dreading the upcoming Budget, against just 22 per cent who feel optimistic. Of those spoken to three in five (60 per cent) say they have experienced stress, and nearly one in four (23 per cent) has lost sleep, as a direct result of speculation over the Budget.

If tax on SMEs goes up again, more than half (57 per cent) of business owners said they would raise prices for customers.

Elsewhere 39 per cent would pause growth or expansion plans, and 29 per cent would stop hiring new staff - at a time when the jobs market is already suffering.

Energy and utility bills are the single biggest cost pressure on SMEs right now, cited by over half (54 per cent) of SME owners.

To avoid these issues, business owners most often chose measures to reduce energy costs (17 per cent) and a reduction or overhaul of business rates (17 per cent) in what they wanted to see in the Budget, even ahead of a freeze or cut in corporation tax (14 per cent) or lower employer NI contributions (13 per cent).