July Business Update: Key Tax and Employment Changes Birmingham Business Owners Need to Know
Welcome to the July 2025 business update from Barnett Ravenscroft Chartered Accountants. As trusted Birmingham accountants for small and medium-sized enterprises, family businesses, and owner-managed companies, we’re committed to helping you navigate changing regulations and make smart financial decisions.
In this month's roundup, we’re covering new HMRC compliance strategies, rising employment costs, profit extraction strategies, childcare tax savings, and government spending priorities. If you're looking for a proactive, approachable chartered accountant in Birmingham, this is the kind of insight we deliver every month.
Hiring Slows as Employment Costs Rise
According to the Office for National Statistics (ONS), UK job vacancies fell by 63,000 between March and May. The unemployment rate rose to 4.6% — the highest in nearly four years — signalling a softening labour market.
What’s driving the slowdown?
Birmingham businesses, like many across the UK, are facing increased payroll costs. National Insurance contribution hikes and minimum wage increases have pushed up costs for employers. The ONS reports that many companies are delaying recruitment or choosing not to replace staff when they leave.
While wage growth (5.2%) is slowing, it still outpaces inflation (3.5%), so pressure remains on business payrolls.
How should Birmingham SMEs respond?
Reassess internal roles: Are staff focused on tasks that drive revenue?
Upskill existing team members: Training may be more cost-effective than hiring.
Check for funding: Local grants or training subsidies may be available in the West Midlands region.
As Birmingham business advisors, we can help you explore cost-efficient workforce strategies tailored to your company.
HMRC Targets Unpaid Tax — Focus on Small Business Compliance
HMRC estimates the UK tax gap at a staggering £46.8 billion. Small businesses are under increased scrutiny, accounting for 60% of this gap. The government is investing £1.7 billion in 5,500 new compliance officers and expanding the Making Tax Digital (MTD) initiative.
Common issues include:
Failure to take reasonable care
Clerical errors
Tax evasion
With MTD for Income Tax due from April 2026 for those earning over £50,000 from self-employment or rental income, it’s time to ensure your digital records are accurate and your accounting systems compliant.
What should Birmingham businesses do now?
Conduct a full tax health check
Review digital recordkeeping
Prepare for quarterly MTD submissions
If you’re unsure whether your systems are MTD-ready, get in touch. We’re experienced in supporting local businesses through digital transformation.
The Most Tax-Efficient Way to Extract Company Profits
"Should I pay myself through salary or dividends?" It’s a common question for director-shareholders, but the answer is increasingly complex. The best option depends on:
Your company’s profits and corporation tax rate
Available reserves
Other income sources
Your age and eligibility for National Insurance exemptions
Personal cash flow requirements
While the traditional method of £12,570 salary plus dividends may still be efficient, individual calculations are vital. Retaining profits for a capital gain on sale or liquidation is another strategy to consider.
Need advice on tax-efficient profit extraction in Birmingham? We provide tailored, scenario-based calculations.
Sensitive Data? New Guidance on SPI Protection
The National Cyber Security Centre (NCSC) has released new guidance for businesses holding sensitive personal information (SPI). While there’s no formal legal definition, examples of SPI include details about an individual’s profession, status, or characteristics that could expose them to harm or prejudice if breached.
NCSC's 9 Principles Include:
Limit who can access SPI
Avoid combining multiple types of sensitive data
Ensure access controls are separate from routine data
As Birmingham business advisors, we encourage companies to review their data security policies. A breach can mean reputational damage, legal penalties, and customer loss.
How Childcare Accounts Can Help Save This Summer
If you have children under 12 in nursery, summer camp or after-school clubs, you may be eligible for a government top-up of up to £2,000 per child through a Tax-Free Childcare account.
Anyone can contribute (including grandparents), and funds must be used with Ofsted-registered childcare providers. Many families in Birmingham are missing out simply because they haven’t set up their accounts yet.
Reminder for employers: Share this benefit with your staff. It’s a great way to support working parents.
Chancellor's 2025 Spending Review: What It Means for Business
The Chancellor’s latest Spending Review highlights:
Capital investment in infrastructure, transport and tech
Efficiency expectations in public sector contracts
Faster approval for infrastructure projects
What Birmingham SMEs should consider:
Use the review as a prompt to reassess internal budgets
If you supply to the public sector, be prepared for closer price/performance scrutiny
Final Thoughts
Whether you’re a growing family business, an owner-managed company, or a well-established SME, staying on top of tax law, digital compliance and staffing costs is vital. At Barnett Ravenscroft, we offer expert advice, proactive planning, and a personalised approach to every client.
If you need help with compliance, MTD, profit planning, or employment issues, we’re here to support you.
Contact Barnett Ravenscroft Chartered Accountants:
☎ Call: 0121 454 7241
✉ Email: info@braccountants.co.uk
We are Birmingham's trusted chartered accountants for small businesses, family-owned firms, and companies looking for more than just number-crunching.