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  • 2022 UK Small Business Statistics You Need to Know for 2025

    2022 UK Small Business Statistics You Need to Know for 2025

    2022 UK Small Business Statistics You Must Know for 2023

    At Pearl Lemon Accountants, we are all about small businesses. They are who we exist to serve, after all, whether they are established family businesses with decades of existence under their belts or scrappy new start-ups. So the fact that we are very interested in UK small business statistics should come as no surprise.

    For small firms, the last few years have been among the most turbulent ever. The effects of the pandemic and Russia’s invasion of Ukraine have been felt all around the world.

    And as a result, some intriguing UK small business statistics have emerged. Both the number of new businesses starting up and the number of failed businesses have changed. How people are earning money for business, their structure, employee count, revenues and avenues of revenue generation have all changed too. And that’s just the tip of the iceberg.

    If you have ever wondered how your UK small business stacks up against your peers and competition, or what the future might have in store for you in these uncertain economic times, then these UK small business statistics are for you.

    Top UK Small Business Statistics

    • There are 5.6 million private sector firms in the United Kingdom.
    • Employees: 75% of businesses only have the owner as an employee (s)
    • Formation of new businesses: In 2021/22, 753,168 new businesses were established in the UK.
    • Age of the company: The average UK company was 8.6 years old as of the end of March 2022.
    • 99.2% of all enterprises are small businesses, according to government statistics (0 to 49 employees)
    • Most common business structure: Private LTD corporations have continuously made up more than 96% of all corporate body types since 2004.
    • Small business failure rate: In the UK, over 1 in 5 new firms fail every year.
    • Registration for VAT: As of March 2021, there were 2.77 million Value Added Tax (VAT) and/or Pay As You Earn (PAYE) registrations among firms in the UK.
    • Average turnover: When just examining enterprises with no employees, the average turnover of a small business (0-49 people) in the UK is £72,461, down from £286,482.
    • Growth Rate: Companies that claim they have a formal financial business strategy expand 30% more quickly on average than those without one.

    UK Small Business Population Statistics

    There are some noteworthy statistics that really stand out when examining the composition of UK businesses overall.

    • In the UK, there are estimated to be 5.6 million private sector companies.
    • Almost all of them are small and medium-sized firms (99.9%), and 75% of them only have owners as employees.
    • The total number of businesses declined by 6.5% between 2020 and 2021. This may be an indication of the significant price that businesses have paid to deal with COVID-19’s effects. And a sad reminder that many of them simply have not survived.

    Here is a look at UK businesses by the numbers in terms of size:

    According to the most recent government statistics (primarily provided by HMRC):

    • In the UK, there are 5.3 million micro-enterprises with 0–9 employees, making up 95% of all businesses. In the UK, a microbusiness’s average annual revenue is £176,016.
    • 99.2% of all firms in the UK are small businesses or 5.5 million of them with 0 to 49 employees. As a result, small businesses are by far the most prevalent kind of firm in the nation.
    • The average turnover of a small business in the UK is £286,482, however, when only considering companies with no employees, this figure falls to £72,461.
    • With 50 to 249 employees, there are 35,600 medium-sized firms or 0.6% of all businesses. This indicates that the proportion of medium-sized businesses in the UK is still quite low.
    • In the UK, a medium-sized company’s average annual revenue is £20,228,523.
    • Large businesses (defined as those with 250 or more employees) made up 7,700 businesses or 0.1% of all businesses. Due to this, large businesses are by far the least prevalent type of company in the nation.
    • In the UK, a large business’s average annual revenue is £279,468,844.

    UK Business Statistics and Ethnic Diversity

    Diversity is something we hear a lot about too. But the UK business world is not as diverse as you might think, especially when it comes to successful small business ownership.

    In the UK, there are about 250,000 businesses with ethnic minority leadership. This represents about 4.5 percent of all businesses that are registered here. All non-white ethnic groups are included in these figures.

    Given that ethnic minorities makeup, up roughly 14% of the total population in the UK and the latest census statistics predict that this figure will continue to increase significantly over the next decade, it is clear that more has to be done to promote ethnic minorities as entrepreneurs in the nation.

    How Many New UK Businesses Got Started in 2022?

    A LOT of new businesses are started every year in the UK. However, after a near record-setting level of new business incorporation in the 2020/21 fiscal year the number of new businesses formed in 2022 has fallen by 7%.

    That record level came, of course, at the height of the pandemic, when those left without employment thanks to lockdowns and other similar measures often felt they had little choice but to try and make money for themselves.

    Year by year new company incorporations:

    Year New Incorporations Y/Y % Change

    2021/22 753,168 -7.1%

    2020/21 810,316 +21.8%

    2019/20 665,495 -1.1%

    2018/19 672,890 +8.5%

    2017/18 620,285 -3.8%

    2016/17 644,750 +5.9%

    How Many UK Businesses Failed in 2022?

    Almost anyone who even considers starting their own business has heard about the high business failure rates that have long been associated with doing so. But just how badly have things like the pandemic, and the much touted by the media ‘cost of living crisis’ really affected UK businesses in terms of failure, at least as far as the statistics show?

    Each year, 20% of newly established businesses in the UK fail. Only about 33% of new businesses survive into their first decade, with 60% failing within the first three years. This illustrates how difficult it is to launch, expand, and run a profitable firm.

    In the UK, there were 581,824 dissolutions from 2021 to 2022, a rise of 32.9% year over year.

    Year by year company dissolutions:

    Year Dissolutions Y/Y % Change

    2021/22 581,824 +32.9%

    2020/21 437,790 -18.5%

    2019/20 536,934 +5.5%

    2018/19 508,865 +3.7%

    2017/18 490,738 +12.4%

    2016/17 436,526 +9.2%

    UK Business Lifespan Statistics

    At the end of March 2022, the average age of a firm on the entire UK registry was 8.6 years. The average age of a UK business has steadily decreased from 10.7 years at the end of March 2000.

    What Kinds of Businesses Exist in the UK?

    There are many distinct kinds of businesses in the UK. Here, we explore some of the most prevalent and the statistics behind them:

    Hospitality

    As of 1 January 2020, there were 223,045 hospitality enterprises in the UK or 3.7% of all businesses nationwide. The gross value added to the UK economy by the hospitality sector in 2020 was £59.3 billion, or roughly 3.0% of the country’s overall production.

    2.38 million people were employed in the hospitality industry in the UK in the three months leading up to September 2020, which accounted for 6.9% of all occupations in the country.

    More recent figures are not as clear, as many hospitality businesses have restructured or report being ‘on pause’ in the aftermath of the pandemic. One thing is certain, for a hospitality business to survive and thrive in 2022 is perfectly possible, but those in the industry have to be far more resilient, open to change and have a specific financial plan in place.

    Retail

    In the UK, there are more than 300,000 registered enterprises that are categorised as retail businesses.

    Over 3 million people are employed by retail businesses or over 8% of all jobs in the UK. Retail sales in the UK totalled £439 billion in 2020.

    There are 120,375 e-commerce businesses in the UK. This represents about 2.2% of all enterprises in the UK.

    The percentage of e-commerce enterprises in the UK has increased dramatically over the past several years as a result of the growing popularity of online shopping, which was in part driven by the COVID-19 pandemic.

    A peak of over 38% of all retail sales was made online in January 2021, up from 8% at the beginning of 2011 and 19% in February 2020. Since then, it has declined, although the most recent period still has it at over 28%. (February 2022).

    What do the other small businesses in the UK do? In 2022, Sixteen percent of all SMEs were operating in construction, and professional, scientific and technical activities accounted for 15% of all SMEs.

    Where are UK Businesses Located?

    Although the nature of business is becoming increasingly global thanks to the rise of cloud computing and internet connectivity, it is interesting, to say the least, to take a look at where in the country the most (and least) businesses are based and how that might affect their viability and profitability. The following UK business statistics do just that:

    London (1 million) and the South East (875,000) had the most private sector businesses, accounting for 34% of the UK business population, while the North East had 154,000 private sector businesses, the least of any English region.

    Between 2020 and 2021 the number of private sector businesses decreased by 336,000 (6%) in England, compared to 28,000 (8%) in Scotland, 25,000 (17%) in Northern Ireland and 1,000 (1%) in Wales.

    London was the English region with the largest numeric decrease (90,000), followed by the South East (57,000). The English regions with the largest decrease, in percentage terms, were London and the West Midlands (both 8%); the smallest decrease was in Yorkshire and the Humber (2%).

    UK VAT and Tax Statistics

    • In the UK, there are 2.77 million businesses that have registered for Pay As You Earn (PAYE) and/or Value Added Tax (VAT). Year over year, this has marginally increased.
    • The total amount of VAT collected for the tax year that ended in March 2021 fell by 22% from the prior tax year.
    • The largest contributor to net Home VAT liabilities remained the Wholesale and Retail industry.
    • Traders with an annual turnover of more than £10 million paid 68% of the total net Home VAT recorded.
    • Only 59,000 of the 2.77 million VAT and/or PAYE enterprises operate from multiple locations.

    International Trade Statistics

    The impact on companies that do business with the EU has drawn more attention since the UK left the EU.

    Vote Leave estimated that some 324,000 UK companies traded with the EU during the EU referendum discussions. While everything was going on, Britain Stronger in Europe only reported that the number was “above 200,000.”

    Regrettably, there are no official statistics on the number of UK companies doing business with the EU. However, we can still make an educated guess that the actual proportion is close to 5–6% of all UK enterprises.

    The EU is reportedly the destination of over 82% of all SME exports. This leads to an estimate that approximately 8% of UK SME companies export to the EU. When taking into account all UK enterprises, regardless of size, this number decreases somewhat to 7%.

    Despite the numerous difficulties faced by UK businesses over the past few years, the overall results and prognosis are quite positive.

    According to the most recent data on small businesses in the UK, more new companies are being formed while fewer businesses are being dissolved. As a result, there are more firms in the UK overall.

    Small businesses are still by far the most prevalent type of business, and a sizable fraction of them are run solely by the founders.

    Only about a third of registered businesses reach the 10-year milestone, and the average age of registered businesses is declining. This figure, which shows that many new enterprises are being founded without a sound long-term strategy, is quite alarming.

    This emphasises the need for enhanced entrepreneurship education to support entrepreneurs in realising their goals. This is especially true of their financial goals. Which is where Pearl Lemon Accountants can help.

    For small businesses, we can offer to do a lot more than make sure that your taxes are correct and that your books are balanced. Our team is composed of financial experts who can guide businesses of any size, and in any sector in every aspect of their financial growth. Contact us to discuss how we can help you.

    Data Sources: Business4Beginners, GOV.UK 1, GOV.UK 2, GOV.UK 3, GOV.UK 4, GOV.UK 5, GOV.UK 6, GOV.UK 7, ONS 1, ONS 2, CREME, UK Parliament 1, BRC, BBC

  • Why Am I Paying Emergency Tax

    Why Am I Paying Emergency Tax

    Introduction

    When HMRC does not have accurate or adequate information about you, your income, or your tax data, emergency tax is triggered. Because they lack the information they need, the right tax code for you will be unavailable, and you will be assigned an emergency tax code.

    When you leave a job, you should be given a P45, which details how much you were paid and how much you’ve been taxed so far this tax year. The P45 will also include your tax code, which your new company will need. If you don’t get a P45 or don’t provide it to your new company, you’ll have to use an emergency tax code until your employer figures out what tax code you should be on.

    In this article, we will get to know more about why we are paying emergency taxes and more.

    Let’s get started and find out why I’m paying emergency tax.

    How to Avoid Paying Emergency Tax?

    Emergency tax is a particular type of tax levied on the taxpayer when they need money. It can be levied either by the state or by the federal government. However, it is not always necessary to pay emergency tax, and there are specific ways to avoid it.

    Avoiding emergency tax is to make sure that you have a good record of your income for the last three years. Try to make sure that you have enough cash reserves. If these conditions are met, you can start looking into other ways like investing in your own business or selling off your assets with a low value.

    There are more to it. You can follow the below-mentioned steps;

    1. When it comes to avoiding emergency taxes, the most typical approach to do so is by paying and filing your tax returns on time. The easiest method to prevent an unexpected tax bill or a penalty is paying and filing your taxes on time.

    2. By paying less than what you owe, you can avoid the emergency tax if you are in a high-income group. After Hurricane Harvey, many wealthy Americans avoided paying their fair share of taxes, leading to a $2.3 billion gap for the poorest Americans.

    3. You may save money on interest by making all your purchases with a credit card. With these, not only can you save money now, but you can put it towards future purchases. This implies that you may pay all of your month’s bills in one go.

    4. If you qualify for deductions and credits, you may be able to lower or eliminate your tax burden. The tax code is a maze of complicated rules, so it might be challenging to know which one to take. The Internal Revenue Service (IRS) has compiled a list of possible tax deductions. See if you qualify for these tax deductions to save money on your taxes.

    Why is this important?

    While operating under the provisions of an emergency tax code, there is a potential that you may pay either too much or too little in taxes. As a result, you are either not receiving as much pay in a month as you should or receiving too much money due to failure to pay sufficient income tax.

    HMRC has demanded that you pay them the tax you owe. Your tax code isn’t something your employer is aware of. This information is only known to HMRC.

    HMRC’s ability to assess the tax codes of millions of employees makes it easy for an incorrect code to slip through the cracks. This means that HMRC’s system is less secure than it could be inaccurately assessing tax codes.

    One out of every ten employees in the United Kingdom is on the erroneous tax code system. For this reason, it is so important to double-check your tax code! With the recent implementation of a new tax code, it’s necessary to double-check how your information will be treated.

    What are the Legalities of Emergency Tax?

    Emergency tax is a term that refers to taxes that are levied based on an emergency. For example, suppose you are in a car accident and need to get medical attention. In that case, you might have to pay for your medical bills as an emergency tax.

    An emergency tax can be paid in cash or by credit card. Suppose you don’t have enough money on hand and need to borrow it. You can open a line of credit with the company that will provide the funds for your emergency tax payment. You can also use your debit card or bank account with sufficient funds.

    Because your employer will not have access to this information while you have an emergency tax code. You will be required to pay tax on everything with no allowances as if you had not yet paid any tax in the current tax year.

    Many people don’t know about the legalities of paying an emergency tax, and they often end up having problems with their banks when they try to borrow money for their taxes. To avoid these problems, they need to know the laws related to taxes in general.

    Conclusion

    This article is an introduction to the topic of emergency tax. It provides a brief background of the emergency tax, its purpose, and its implementation. It also gives some tips on how to avoid it in the future. This article concludes that paying an emergency tax can be avoided by being more conscious about your spending habits and being more careful with your money.

    FAQ

    What does the emergency tax do?

    The emergency tax is a temporary tax that was introduced by the Trump administration in order to fund the current spending. The emergency tax will last for one year and will be used to finance military projects, border security, and disaster relief.

    The emergency tax is one of the most controversial measures introduced by the Trump administration. It has been criticized by both Democrats and Republicans as it is seen as a new way of increasing taxes without any legislation being passed through Congress.

    How much is the emergency tax?

    This is a question that many people ask themselves when they find themselves in a situation where they need to get money as quickly as possible. The answer to this question can be found in the emergency tax section of the IRS website.

    The IRS website provides detailed information about how much an emergency tax is, and what kind of emergencies qualify for an emergency tax.