Small businesses are facing a series of tax changes from today (6 April), which include higher pension costs and lost reliefs.
The doubling of auto-enrolment minimum employer contributions – from 1 to 2 per cent – "will hit the very smallest firms and start-ups the hardest", according to the Federation of Small Businesses.
Small businesses in labour-intensive industries such as retail, construction and childcare will feel the impact of this rise most acutely, Mike Cherry, the FSB's national chairman warned.
"These sectors are already beset by high inflation and skills shortages," he added.
The total auto-enrolment minimum contribution will increase to 5 per cent, with the employee paying 3 per cent.
In 2019, it will increase again to 8 per cent, with the worker paying 5 per cent.
A total of £17bn a year will be going into workplace pensions by 2019 to 2020 because of auto-enrolment.
Mr Cherry said: "Small business owners want to see employees save, but more needs to be done to help firms absorb high labour costs. That starts with increasing the Employment Allowance to £4,000.
"At the same time, new incentives need to be put in place to encourage the self-employed, who miss out on auto-enrolment, to save for the future."
Only 16 per cent of self-employed save through auto-enrolment, according to data from the Department for Work and Pensions (DWP).
Meanwhile, four million entrepreneurs will find themselves £150 worse off because of a delay to the scrapping of Class II National Insurance Contributions (NICs).
The levy was set to be dropped with the start of the new tax year, but the move has been shelved temporarily, the FSB said.
Mr Cherry said: "The self-employed miss out on many social security benefits, like auto-enrolment, that employees enjoy. That should be recognised by HMRC.
"Class II NICs need to be shelved next year without any more excuses."
Other changes taking effect today include a reduction in the dividend allowance to £2,000 from £5,000 and a doubling of the Enterprise Investment Scheme limit to £2m.
The turnover threshold for Value Added Tax (VAT) registration has been frozen at £85,000 until 2020.
maria.espadinha@ft.com
