As the saying goes, tax is one of life’s certainties, but paying the tax bill is not so guaranteed it seems – at least on time, with news that small businesses are finding its increasingly difficult to make payments. How can firms meet their obligations while safeguarding cash flow?

Which small firm taxes are rising and what are the consequences?

According to new research form Premium Credit, more and more small businesses are looking to spread the cost of their tax bills as they try to manage higher rates and greater demands on their capital. The number of firms seeking help with the cost of VAT, corporation tax and self-assessment tax bills has risen by a fifth.

The rise in the employers’ national insurance contributions has been the headline tax rise, but small businesses are also dealing with challenges relating to business rates (despite government reform in this area), business sale tax, capital allowances and wage increases. With regard to the latter, the National Living Wage for workers aged 21 and over has risen to £12.71 per hour.

This difficult fiscal landscape, combined with ongoing market uncertainty, means that small businesses continue to face significant pressure on margins and cash flow. As well as tax bills, firms are having to manage demands to invest in areas such as cyber-security, sustainability-led development, workplace wellbeing, digitalisation and AI, and talent recruitment and retention.

Interestingly, the news about managing tax bill payment comes as HMRC has revealed that small businesses are responsible for two-thirds of the country’s £59 billion tax gap for 2024-2025. The most common unpaid bill was corporation tax, with the shortfall in this area rising by over 18% compared to the previous year.

How alternative lenders can help with paying higher tax bills

The findings from Premium Credit and HMRC make for interesting and concerning reading. They paint a picture of sector that is increasingly struggling to keep its head above water as conditions remain highly challenging and the bills keep coming. Another change in prime minister does little to suggest that the climate will meaningfully improve in the short term.

At the same time, while access to finance is integral to managing costs, small business lending from traditional sources remains difficult as Q3 approaches, intensifying the squeeze on firms. Notably, almost 40% of firms are finding accessing affordable finance one of their biggest challenges, while there has been a call for the introduction of legislation that would require banks to increase access to low-cost lending for small businesses.

This is where alternative lenders can help. In response, alternative lending solutions, such as invoice finance, asset finance and peer-to-peer lending, have become funding lifelines. For example, asset finance is being commonly used means for buying vehicles, machinery or equipment, while invoice finance is being employed to manage staff costs and, more broadly, to cover costs while income catches up.

Overall, by offering a more accessible, cost-effective and personalised approach to lending, these alternative finance facilities are helping small businesses navigate the current climate and target greater stability and growth.

Small business finance options for affording increased tax demands

Higher bills, including tax bills, are never easy to manage but in current conditions, this burden is particularly challenging. But these costs have to be met and small businesses have to find a way to meet deadlines and make payments while safeguarding cash flow.

As such, at a time when legacy banks remain cautious with regard to small firm lending, it is important that key-decision makers are aware of all the available finance options, including the services of alternative lenders.

To find out more about A&T Business Associates services, contact Steve Bowles on 01903 602211 or steve.bowles@atbusinessassociates.co.uk.