These raids will drive the Government’s tax take to 42.1pc of GDP by the start of the next decade, the IMF forecasts, a peacetime record for Britain.
Tina McKenzie, at the Federation of Small Businesses (FSB), said increases in the dividend tax, business rates and the tax on the disposal of business assets all “hit everyday entrepreneurs”.
“The figures underline in stark terms our call for the Government to do all it can to foster entrepreneurs and encourage people to take the leap into starting their own business,” she said.
The ONS figures mark the first time fewer than 80,000 new companies were set up in the first quarter of any year since quarterly records began in 2017.
New businesses decline in almost every industry. The number of new finance and insurance companies founded fell by a quarter compared with the start of 2025, with health and social care suffering a similarly large drop.
Anna Leach, the chief economist at the Institute of Directors, said the Iran war and subsequent spike in energy prices had made an already difficult situation worse for would-be entrepreneurs.
“The Middle East adds a new significant source of uncertainty into the business environment,” she said.
The higher minimum wage, which came into force this month, along with extra regulations, is “a further increase in the burden on businesses”, she added.
“It is hard to find positive reasons to be kicking things off right now when you have got quite such a big shock to the economic environment, and we know financial conditions have already tightened.”
Borrowing costs have risen sharply since the start of the war in Iran, and financial markets expect the Bank of England to raise interest rates from 3.75pc to 4.25pc over the next year.
At her Spring Statement last month, the Chancellor said she was “backing innovation and harnessing the power of AI so that entrepreneurs and innovators thrive here in Britain”.
The Government was contacted for comment.
