LONDON – Taxation has surged to become the second most significant worry for businesses across the United Kingdom, according to the latest official data, surpassing concerns over inflation that have dominated recent economic discourse. The finding underscores a shifting landscape for UK enterprises grappling with increased cost pressures stemming from recent policy changes.
The Business Insights and Conditions Survey from the Office for National Statistics (ONS), published on May 22, 2025, reveals that 11% of businesses now cite taxation as a major concern. This places tax as the second most common challenge, trailing only falling demand, which remains the top worry for UK firms.
Notably, the report highlights that concerns about taxation have now overtaken inflation, which was reported as a major worry by just 8% of businesses in the latest survey. This represents a significant shift from previous periods where rising prices were a primary driver of business anxiety.
The Growing Trend
The ONS data indicates that this trend has been progressively building since summer 2024. The increasing focus on tax burdens reflects the tangible impact of new tax policies implemented or taking effect recently.
The most prominent driver of this heightened concern appears to be key changes made to employer National Insurance contributions (NICs). These changes, which came into effect on April 6, 2025, have directly increased the cost of employing staff for many businesses.
Unpacking the NI Changes
The specific alterations to employer NI contributions are substantial. The standard employer NI rate has seen an increase, rising from 13.8% to 15%. Simultaneously, the secondary threshold, the point at which employers begin paying contributions on an employee’s earnings, has been significantly lowered from £9,100 to £5,000 annually.
These dual changes mean that employers are now paying a higher percentage on a larger portion of their employees’ earnings below the upper earnings limit. For businesses with significant payrolls, particularly those employing a substantial number of lower-paid workers whose earnings fall between the old and new secondary thresholds, the increase in staffing costs is considerable.
Impact on Business Operations
The direct consequence of these rising costs is forcing businesses to re-evaluate fundamental aspects of their operations. The report suggests that companies are actively looking at their business models, workforce planning strategies, and overall profitability in light of the increased tax burden.
Higher NICs effectively translate into a higher cost per employee, putting pressure on wage budgets and potentially impacting hiring decisions or wage growth. Businesses may need to absorb these costs, pass them on through higher prices (though falling demand is already a concern), or look for efficiencies elsewhere within their operations.
The particular impact on businesses employing lower-paid staff is noteworthy. The reduction in the secondary threshold means that employers now incur NI costs on earnings between £5,000 and £9,100 per year per employee, where previously there were none. This disproportionately affects sectors reliant on lower-wage workers.
Strategic Response Suggested
In response to the elevated focus on tax, the ONS report hints at a growing recognition among businesses of the need for a more proactive and strategic approach to tax planning. This includes exploring ways to mitigate the impact of higher costs through legitimate means.
The report suggests businesses are considering utilizing available tax reliefs and reviewing remuneration models. This could involve examining different ways of structuring pay and benefits to potentially optimize the overall tax and NI burden for both the employer and employees, within the bounds of tax legislation.
As taxation solidifies its position as a top-tier concern, alongside weakening demand, the data underscores a complex and challenging economic environment for UK businesses navigating increased costs and softening market conditions. The strategic management of tax obligations is poised to remain a critical area of focus for companies throughout the year [3].
