Business cost concerns hit record high as SMEs brace for April tax rises, finance brokers say

• Rising numbers of finance brokers  (58%) say business costs are now the main concern for their SME clients – up 10 percentage points from Q3 2025 and the highest level on record. 
• Of all the tax and policy changes taking effect in April 2026, a third (33%) of finance brokers say the Government's planned minimum wage increase will have the biggest negative impact on SMEs.
• Lower taxes are finance brokers' top choice to help SME growth in 2026 (46%) – more than three times as many as the next most popular measures.
• Despite mounting pressures, 74% of brokers expect demand for SME finance to rise over the next six months, up from 66% last quarter.

More than half (58%) of finance brokers cite increased running costs as small business owners' biggest concern, according to iwoca's latest SME Expert Index. 

This represents a 10-point increase from 48% in Q3 2025 and is the highest level recorded since iwoca’s SME Expert Index began tracking this question in Q4 2022, highlighting the intensifying cost pressures facing the UK's 5.5 million small and medium-sized enterprises.

April tax changes loom large

The findings come as SMEs prepare for a wave of Government policies to come into effect in April 2026, that are expected to increase costs. When asked which policy changes will have the most negative impact on small businesses, a third (33%) of finance brokers pointed to the minimum wage increase. Increases to the basic and higher rates of dividend tax were the second-highest concern (26%), followed by business rates reform (24%), underlining the breadth of cost pressures facing small businesses.

Against this backdrop of rising taxes and higher costs, finance brokers say lower taxes are needed to boost SME growth in 2026. Almost half (46%) cite this as their top priority – up from 38% at the same time in 2024 – and more than three times the next most popular measures of stopping National Minimum Wage increases (14%) and enhancing local business support (14%).

Demand for finance rises as recession fears ease

Despite mounting cost pressures, SMEs are increasingly seeking finance to support their businesses. Three-quarters (74%) of finance brokers expect demand for SME finance to rise over the next six months, up from 66% last quarter. 

This is reflected by iwoca’s SME Lending Thermometer, which rose to 5.98 for Q4 2025, up from 5.15 in Q3. The score is based on a scale where 1 indicates extremely low demand for finance, and 10 represents extremely high demand. 

This growing appetite for finance comes as concerns about a potential recession have fallen to their lowest level in three quarters. Just 42% of brokers say their SME clients are worried about the possibility – down from 48% in Q3 2025 – suggesting small business confidence is showing signs of recovery heading into 2026, and with it, a willingness to invest and borrow.

‍Giovanni Contratti, Director, Broker Channel at iwoca, commented: “Small businesses are clearly feeling the pressure of rising costs, and the further Government-mandated cost increases in April will add to that burden. But what’s encouraging is that SMEs aren’t sitting back. Demand for finance is growing as businesses look to invest and continue growing. We’re seeing businesses take action rather than cautiously waiting and seeing, and at iwoca, we’re backing them with the flexible finance they need to navigate these pressures.”