Around one in five SMEs believe it will become more difficult to pay tax bills in the year ahead as business tax rises come into effect, new research from Premium Credit shows.
The study by the leading provider of finance for businesses found worries about paying tax bills are a long-standing issue for SMEs but the introduction of higher Employers’ National Insurance from April is ratcheting concerns higher.
Around 20% of SMEs – the equivalent of a million companies – worry that paying tax bills will become more difficult in the year ahead due to tax rises, while 28% believe that it is very or quite likely their firm will struggle to pay a tax bill in the next five years. More than one in five (21%) say it has become more difficult to pay tax bills since the start of the cost of living crisis.
Currently, one in 12 (8%) of the UK’s 5.487 million SMEs say they are struggling to pay tax bills, unchanged from research last year, which also found 8% were struggling. Around 47% of them say they are struggling to pay a VAT bill and 44% a Corporation Tax bill.
More than a third (35%) of those struggling say they will try to agree with HMRC to pay the bill over a longer period of time, while 29% say they will take on more work to pay the bill and 27% will take out a loan.
The research found 15% of SMEs have struggled to pay tax bills in the past 10 years, with 25% of them owing more than £50,000. A third (32%) said they agreed to payment deals with HMRC, while one in five (19%) laid off staff to afford the payment.
Jennie Hill, Chief Commercial Officer, Premium Credit (Specialist Finance) said “Paying tax bills is a long-running issue for SMEs and the latest tax increases are expected to add further pressure.
“Of course firms should plan ahead and ensure they have money set aside to meet bills when they are due but cashflow issues can be a problem and owners will be focused on running their business effectively.
“Any company which is struggling should consider spreading the cost into convenient monthly payments to help them pay their tax on time and improve vital cashflow.”