CEOs Comment

Some of this article was researched, developed and authored before the economic effects of the conflict in the Middle East started to take hold. However, despite the fact the Chancellors recent Spring forecasts are now going to be difficult to meet, it is still important for SMEs in the UK to keep an eye on tax planning. This article will help keep you informed.

We, along with UK economists, believe the effects of the war will take 12 to 24 months to get out of the system once it is concluded. During this time taxation planning will become even more crucial to SMEs as costs, employment and growth continue to be adversely affected.

Our team at Kaizen will continue to monitor the whole economic and trading situation for SMEs and the effects the Middle East conflict will have on trading for them. We will offer  information, advice and guidance as and when required. So keep looking out on Linked In and our website.

Darren Trice. CEO Kaizen

More stability in the tax system is needed to better support entrepreneurs

The Institute of Chartered Accountants in England and Wales (ICAEW) has recently said that doing business in the UK is too uncertain and expensive, and more stability in the tax system is needed to better support entrepreneurs. The ICAEW considers that hikes in tax levels have disproportionately increased the cost base of UK businesses as well as the attractiveness of these businesses to internal and external investors and this needs to be looked at by government.

Here are just some of the changes that they say the government should consider straight away. Firstly, an outright capital gains tax exemption could be more effective in encouraging the reinvestment of capital into new ventures. Recent changes to the inheritance tax and domicile rules have also complicated reinvestment decisions and may tempt some to move funds abroad. In addition, from April 2026, the income tax relief that can be claimed by someone investing in a Venture Capital Trust will be reduced from 30% to 20%.

Keep an eye out for changes in government policy in these areas and build any changes into your plans. To ensure you get up to date advice and guidance get in touch with us, we will be happy to help and ensure you are using current information in your decision making.  

Future Predictions

Tax policy is closely related to plans for the economy, and the government laid out its medium term plans recently in the 2026 Spring Forecast. These have since been affected by the effects of the Middle East conflict. However, the predictions below do provide some early clues about future tax and spending pressures. We have added our comments on what could happen now to the original forecasts, these are in italics and in brackets below. It must be said these are estimates based on what’s happening now (24/03/26) and we have made an assumption that the conflict is going to be broadly over in the next six months.

·      Gross Domestic Product (GDP) growth was expected to slow from 1.4% in 2025 to 1.1% in 2026. However, GDP growth was expected to pick up to an average 1.6% a year from 2027 to 2030. (We can now expect little or no growth in 2026 but a catch up starting in 2028 with the 1.6% target now being firmly in 2029/30)

• Real GDP per person was forecast to grow at an average rate of 1.1% a year between 2026 and 2030. This is an indicator of changes in standards of living. (GDP will not now start to meaningfully increase until 2027 at the earliest)
• The unemployment rate was forecast to rise from 4.75% in 2025 to a peak of 5.3% in 2026. And it was predicted we would see the unemployment rate ease back to 4.1% by 2030. (the peak may be higher this year and the fall back to around 4% will not happen for five years)
• Public sector net borrowing was projected to fall from 5.2% of GDP in 2024/25 to 4.3% of GDP in 2025/26. It was then forecast to reach 1.6% of GDP in 2030/31. (PSB will not start to fall until closer to the end of the decade and it is likely to remain above 2% after that)

Future Taxation

So, what does all this potentially reveal about tax? Firstly, the tax environment will feel increasingly burdensome for the rest of the decade until the economy improves in line with the above predictions. As a share of GDP taxes are already projected to climb to 38.5% by 2030-31, a post-war high. This level could increase.

Much of this increase comes from the freeze on income tax thresholds, which is planned to continue until April 2031. This means more people are being pulled into paying tax for the first time. Existing taxpayers could be paying higher tax rates if they get salary increases, meaning less money to spend.

The increase in employer national insurance contributions, which took effect last April, is also playing a significant role in the higher tax take. These increased costs are affecting SME hiring decisions at a time when unemployment is forecast to rise and not fall meaningfully now until after 2030.

The Message for SMEs

The message for SME Owners is that tax awareness and planning is becoming ever more important, especially with the Middle East Conflict in progress. Higher taxation is likely to remain central to government policy for at least the next three years as the welfare budget continues to increase due to things like unemployment levels. For individuals and businesses, this means keeping a close eye on allowances and thinking more about the timing of income and gains whilst making sure you are using all the reliefs available to you and your business. Reviewing things like pension contributions, business investment and profit extraction are all going to become more important. Simple, practical and informed decision making can help you to keep future tax payments under control.

If you want to include business and personal tax planning as part of your future strategy and you need help, information and guidance please call us today on 01482 772261 or email info@kaizengroup.uk to arrange a no charge initial consultation.

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