Two-thirds of start-ups rely on friends and family to stay afloat
29th July 2015 | News
Two-thirds of micro businesses in the UK have to rely on unpaid support from friends and family, with red tape and increasing employment bureaucracy blamed for the dissuading start-up owners from taking on new staff.
That’s according to a new report from Lloyds Bank Insurance, which quizzed 502 company directors in its latest biannual review of the UK small business sector.
Friends and relatives spend an average of six hours a week assisting micro businesses – defined as those with less than 10 employees – with tasks such as social media account management and childcare.
40 per cent of micro business owners pay their family and friends an average salary of £14 an hour, but more than half rely on unpaid support; meaning the UK’s family support economy could be worth as much as £64.3m a week.
It comes after a costly year for business owners, who have been forced to navigate the pension auto-enrolment landscape as all companies now have a legal obligation to opt their employees into a workplace pension.
Many micro business owners have also been taken aback by the government’s recent decision to introduce a new compulsory minimum wage of £7.20, which will rise to £9 by 2020.
Self-employed professionals have also been reminded that those who make payments on account must make their first submission on Friday 31st July.
Payments on account, which are advance payments towards the final tax bill, are often misunderstood by new freelancers.
In addition, the need to warn the self-employed sector about the deadline being imminent is stronger than ever this year because a move in March to axe tax deadlines for most people could have confused many.
Chas Roy-Chowdhury, head of tax, Association of Chartered Certified Accountants (ACCA), said: “Taxpayers in self-assessment who can’t clear their bill through an employer’s PAYE scheme (most sole traders and partners) have to pay half their tax on account, based on last year’s liability.
“With the rise in the number of self-employed people over the past five years, the number of people who have to pay on account will likely rise as well.
“If you know you will be getting a tax bill come January, you must remember the deadlines for payment throughout the year.”