Eroded Trust: The Hidden Cost Of Tax Reform on SME'S

Michael Ball, Tax Partner at Streets

HE argues that constant adjustments to policies such as National Insurance, the minimum wage and inheritance tax are creating uncertainty that prevents businesses from planning for growth. With many SMEs already under financial pressure, Ball cautions that the government’s short-term approach risks damaging long-term economic stability and discouraging investment across key sectors.

Following Rachel Reeves’ speech last week,  concerns are mounting within the business community about the impact of short term tax decisions. Ball explains that the frequent adjustment of tax policies is creating instability that prevents SMEs from making confident, long-term plans.

Ball said: “SMEs need consistency and predictability to plan for growth. Yet we’ve seen a pattern of reactionary tax changes, which doesn’t focus on the long-term strategy. 

“Each new announcement, whether it’s a tweak to National Insurance or a shift in inheritance tax, adds another layer of uncertainty. Businesses are focusing on managing costs rather than investing or expanding.

“The frequent changes to rates, reliefs and business incentives are forcing many firms to adopt a defensive stance. 

“Rachel Reeves’ speech on Tuesday, appeared to pre-empt further tax rises in the Autumn Budget. Increases in headline taxes such as Corporation Tax or VAT, and smaller rises in income tax, National Insurance and business rates, combined with new compliance requirements will continue to put pressure on SME’s margins.”

Ball argues that this fragmented approach to taxation fails to support businesses through a period of economic recovery and discourages entrepreneurship.

“The government’s inability to maintain a coherent tax roadmap means SMEs are being left to navigate constant shifts without clarity,” Ball added. “This lack of stability is damaging confidence, leading many to delay investment decisions or, in some cases, sell off assets to meet new tax liabilities.”

Recent changes to inheritance tax have further complicated succession planning, particularly for family-run firms and agricultural businesses. Ball highlights the double taxation risk that arises when company assets are subject to inheritance tax, calling it “a significant deterrent for long-term investment and growth.”

“Although these moves may appeal to voters, they often ignore the practical impact on real businesses,” he said. “For many owners, these policies feel punitive rather than supportive.”

With many SMEs already grappling with rising costs, higher wages and economic uncertainty, Ball urges the government to prioritise a clear, long-term tax strategy over short-term wins.

“We need joined-up thinking, not just on taxation, but on how policy supports sustainable growth,” Ball concluded. “Without a stable fiscal framework, the UK risks stifling the very businesses that drive employment, innovation and regional development.”