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Running a business is hard enough without constantly having to navigate changes to tax and employment regulations. But staying ahead of these developments isn’t just about avoiding penalties - it can help you protect your bottom line and even identify opportunities to mitigate rising costs. With significant changes coming in April 2025, now is the time to prepare.

Here’s what’s changing and, more importantly, what you need to do about it.

Higher employment costs

Tax rules are already complex, and they’re about to get even tougher for small businesses. From April 2025, Employer National Insurance Contributions (ENICs) will rise from 13.8% to 15%. Combine that with the increase in the National Living Wage, and many businesses - particularly those in retail, hospitality, and other labour-intensive industries - will face a significant cost hike. Even SMEs with just a handful of employees could feel the squeeze on cash flow.
 

To offset this, the government is increasing the Employment Allowance (EA) from £5,000 to £10,500. That’s good news—if you qualify. But many small businesses either fail to claim it or misunderstand the criteria. For example, GP surgeries and sole director companies often make incorrect claims.
 

What should you do? Check your eligibility now. If you qualify, ensure your payroll software or accountant is handling the claim correctly—this is free money, and you’d be foolish to leave it on the table.

Hiring? You’ll need to be even more careful

If you employ staff, expect more red tape. The proposed Employment Rights Bill is likely to introduce new compliance obligations, meaning more admin and potential risks if you get it wrong.
 

As costs rise, many businesses will look to freelancers and contractors instead of permanent employees. That’s a logical move - but only if you understand the off-payroll working rules (known as IR35). If your business meets certain size criteria, you’ll be responsible for determining a contractor’s tax status and ensuring the correct tax is paid. Get it wrong, and you could be hit with fines and backdated liabilities.
 

The takeaway? If you’re using freelancers, get professional advice. Employment law is a minefield, and HMRC has a habit of targeting businesses that get it wrong. A good accountant with expertise in employment law can save you from an expensive mistake. 

Prepare for 2025

Tax and employment rules aren’t going to get simpler anytime soon. But with the right approach, you can stay ahead. Here’s how:

• Know Your numbers – If you’re still avoiding financial reports, stop. Understanding your numbers isn’t optional, it’s the foundation of every business decision you make.
• Review your tax filings, payroll processes, and VAT compliance - if you’ve been cutting corners, expect HMRC to notice. And if you don’t already have a trusted accountant, get one—because tax mistakes are about to become even more costly.
• Use an Accountant – A good accountant does more than file returns. They help structure your business tax-efficiently, ensuring you don’t pay more than you need to.
• Think strategically – Review your business model, particularly your value proposition and distribution channels. Keep them up to date and adapt accordingly.
• Stay informed – Changes like the Employment Rights Bill and potential umbrella company reforms could impact your hiring strategy. 
• Leverage digital tools –the right tools can streamline your financial reporting and improve real-time financial insights.

Tax and employment law changes don’t have to be a threat—but only if you take action. The businesses that prepare now will adapt, offset rising costs, and stay compliant. 

If you need help you can contact me at www.calendly.com/noelguilford.

Noel Guilford