In 2025, small businesses faced a series of significant changes influenced by the preceding Autumn Budget and ongoing discussions about employee rights. The year began with the Spring Statement in March, which offered little for business owners, primarily confirming an increase in the National Living Wage.
Effective April 2025, the National Living Wage rose to £12.21 per hour for workers over 21, £10 per hour for those aged 18-20, and £7.55 for younger workers and apprentices. While this increase aimed to support low-income workers, it added strain on small businesses. The same month also saw a contentious rise in employers’ National Insurance contributions, which increased from 13.8% to 15%. This change directly impacted business expenses, complicating financial planning.
Additionally, alterations to UK company size thresholds introduced on April 6 could potentially streamline regulatory requirements for some businesses, depending on their size. In July, the Labour government unveiled its Small Business Plan, which included proposals targeting late payments, business rates, financing, administrative costs, export support, and training initiatives.
The Autumn Budget, delayed but rich in proposals for small and medium-sized enterprises (SMEs), brought renewed attention to pressing issues. Finally, the Employment Rights Bill, which passed in December, was viewed as a significant step toward providing businesses with clearer employment guidelines after extensive deliberation in Parliament.
As small businesses prepare for 2026, crucial deadlines are approaching, including tax return submissions and future wage increases. This landscape points to a year of both challenges and opportunities for SMEs navigating evolving economic conditions.
Why this story matters
- The changes directly impact operational costs and compliance for small businesses.
Key takeaway
- The year has seen significant legislative developments, affecting wages, business costs, and employee rights.
Opposing viewpoint
- Some argue that rising wage and tax obligations may hinder growth and employment opportunities for small businesses.
