Rising tax and cost pressures forced one in five (20%) SME bosses in the North to lay off staff last year, according to Rathbones, one of the UK’s largest wealth and asset management groups.

SME founders, owners and senior executives across the North disclosed cost pressures, notably higher business rates and national insurance contributions are weighing heavily on firms and driving up redundancies.

The findings, in a targeted poll for Rathbones, reveal that rising taxation and regulatory burdens are now one of the biggest threats to more than half of smaller firms in the North (55%) second only to overall rising costs, cited by 71% of respondents.

With over one third (35%) of SME leaders in the North reporting that over 25% of their personal wealth is tied up in their business, escalating operational costs are increasingly spilling over into their personal finances.

This pressure is intensified by a sharply rising personal tax burden, they say. Frozen thresholds continue to push more individuals into higher tax bands, while cuts to capital gains and dividend allowances - combined with higher CGT and dividend tax rates - are further squeezing returns. For many SME owners who take profits via dividends, these changes have materially eroded post tax income and are forcing a rethink of longstanding profit extraction strategies.  

Greg Winter, Financial Planning Director in Rathbones' Liverpool office, says: “We consistently hear from business owner clients across the North that they are determined to grow, hire and contribute to the wider economy. But heightened tax pressures are increasingly stifling those ambitions. Entrepreneurs are being squeezed from both sides — higher taxes at the business level and rising personal tax bills. This double whammy makes it extremely difficult to plan, invest and build for the future.  

“For most entrepreneurs, the line between business and personal finances is incredibly thin. Tax changes at either level can have an immediate impact on household income, retirement planning and long-term investment goals. That’s why it’s essential to consider business planning and personal financial planning together, rather than in isolation - particularly in a tax environment that is becoming more complex and less predictable.”  

Other key findings include:  

• Business owners in the North West were most likely to have reduced their workforce – 24% compared to 19% and 14% in the North East and Yorkshire & the Humber respectively.
• Business owners in the North East were feeling the impact of taxation and regulatory change most sharply – 58% compared to 57% and 52% in the North West and Yorkshire & the Humber respectively.
• Flexible capacity is on the rise: 8% have increased their use of freelancers or contractors, and 9% have shifted towards more part time or flexible roles.  
• Demand for targeted relief: Just under half (49%) say that measures such as business rates relief or adjustments to employer National Insurance contributions would directly support growth and investment.