Payroll and related taxes are the largest single operating cost for many businesses and one of the hardest to manage. The recently announced rise in Employers National Insurance will directly hit the profitability and liquidity of all businesses.
The announcement of a 6.7% rise in National Living Wage (NLW) for over 21s in 2025, on top of the 9.7% rise this year, will further strain the purses of many businesses. The hospitality and healthcare sectors which tend to rely heavily on minimum wage workers and those on zero hours contracts are likely to find their business models strained.
Smaller businesses who are already battling to recover from the recent cost of living crisis or still struggling following the impacts of the pandemic may be left with little choice other than to manage costs by reducing headcount or limiting pay rises as well as passing through higher costs to end consumers.
Although Labour may have met their election pledge of not directly raising taxes on workers on paper, the downstream impacts of the announced tax rises may still result in a similar squeeze on disposable income for the man on the street at the end of the day.
At Crowe, we have a team of experienced and licensed insolvency practitioners who can advise you on the best course of action, depending on your business’s circumstances. Please contact Steven Edwards, Vince Green, Mark Holborow who are licensed insolvency practitioners, or your usual Crowe contact.
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