Starting up and running a small business is a challenging process and there are many aspects an owner must consider. There are a number of challenges facing UK small business owners and it is essential owners understand the potential implications each may have on their business. This article summarises some of the key challenges facing UK small businesses today.
Small business tax
Tax is often one of the largest single costs a small business has to meet and business owners, sole traders and entrepreneurs are rightly anxious to minimise their tax liabilities, particularly in an increasingly competitive commercial environment.
Tax isn’t the most exciting part of running your own business, and most small business owners find tax a complicated burden that distracts from getting on with real work, but it is vital small businesses ensure that they are able to take advantage of any tax breaks.
Some things to consider:
- Is your new business set up using the most appropriate trading structure?
- Are you eligible to receive R&D tax relief for your research and development?
- Can you claim tax relief on the purchase of new machinery or equipment?
It can be difficult to know exactly with tax rules apply to you and your business, so speak seek professional advice.
The EU has certainly had a significant influence on the UK tax system, perhaps most notably with regard to VAT. So what happens next? Will the Brexit vote result in a complete overhaul of UK tax as we know it?
Cyber security and data protection
As small business in nearly every commercial sector start to rely more and more on technology, now might be the time to review your data protection procedures and implement appropriate changes. Recent government estimates suggest that a data breach costs SMEs an average of £310,000.
Additionally, with the new EU General Data Protection Regulation (GDPR) finally released, in April 2016, – which apply to any organisations that hold personal data – small businesses will need to start planning ahead and preparing for the changes. Data protection errors will now be far more expensive than ever before.
Find out more about the new GDPR data protection rules here.
Rising wage rates and increasing payroll costs
As well as yearly National Minimum Wage increases, small businesses are going to be the hardest hit by the introduction of the new National Living Wage. Whatever sector they operate within, small businesses often employ staff working on the National Minimum Wage, so it is not surprising that payroll costs have risen significantly in recent months and years. On the back of The Pensions Regulator fining Swindon Town Football Company £22,900 after it failed to comply with auto enrolment, this is also a worthwhile and needed reminder about preparing for your auto enrolment duties.
Register for one of our free monthly auto enrolment workshops here.
While certain costs – like the new National Living Wage and the onset of auto enrolment – are out of your control, there are other areas where you can make savings. Reducing the number of payroll errors is one of those key areas. Managing an efficient payroll can be a daunting prospect, but payroll is something that employers must get right. Recent research, however, shows that small businesses are being hit hard by a crackdown on payroll mistakes.
The research found that HMRC has collected £737m from investigations into companies over tax avoidance and errors relating to employer compliance. Of that total, small businesses account for more than half (£373.4m) of the additional sums collected, despite larger businesses making up 89% of total UK payroll.
Determining your business’ correct payroll position can be a complex process and, with more casual workers, ongoing changes in wage rates and the continued implementation of auto enrolment small businesses are being caught out.
Beyond the financial implications, payroll errors can be costly for small businesses – it can be detrimental to staff morale, effect productivity and ultimately impact upon business performance. If your small business is struggling with the ever-increasing compliance obligation on employers it may be time to consider outsourcing your payroll matters. This can be an affordable and effective option for your business.
If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.
Alternatively, we offer all new clients a free initial meeting to have a discussion about their own personal circumstances – find out more or book your free initial meeting here. We have offices in Sheffield, Doncaster and Northampton.