How will the October Budget affect struggling businesses?

Many company directors will be picking over the budget to see how it will affect their bottom line. Without doubt, this has been a budget that has taken the majority of the taxes directly from businesses as opposed to “working people.”

For companies that are already struggling, this budget will be a big worry.

National Insurance

When a company goes “bust,” it is often the case that the biggest creditor is HMRC. It is currently estimated that there is some £40bn of taxes owed to HMRC by struggling companies.

The changes set to be introduced in April 2025 will make it more likely that businesses will become insolvent. The main reason for this is a rise in employers’ national insurance contributions. Unlike Capital Gains Tax (CGT), that is levied on profits, i.e. companies that are not struggling, any increase in employers’ contributions are paid irrespective of the financial state of the company. This is likely to put huge pressure on. What is more, employers’ National Insurance (NI) is a tax that is paid on the 19th day after the employee is paid. CGT and VAT are not paid until between 3 and 18 months later.

One good thing is that the employers NI allowance is increasing from £5k to £10k which means that very small businesses with a handful of employees will actually be better off.  To see exactly how such small businesses will be affected by the changes, see this post here on Linkedin. https://lnkd.in/eKKSc2r9

Minimum Wage

An increase in the minimum wage will disproportionately affect already struggling businesses as they will have no headroom to absorb the increase. Struggling businesses are often more nervous about raising prices than more profitable ones, as any loss of a customer could spell the end.

If your company is already struggling with payroll taxes (NI) then it is probably a good idea to get ahead of the situation and talk to company rescue experts at