FSB Warns Against Tax Increases in Upcoming Budget

As the Labour Government prepares to unveil its first budget, small business owners in the UK anxiously watch for any changes that could affect their operations.

The Federation of Small Businesses (FSB) has raised concerns about potential tax increases that could harm the business environment. The FSB and other groups have urged the Chancellor of the Exchequer, Rachel Reeves, to avoid "anti-enterprise tax rises" that could stifle growth and innovation.

Capital Gains Tax

One of the primary concerns centres around the possible increase in Capital Gains Tax (CGT). Currently, CGT rates are lower than income tax, and entrepreneurs enjoy certain reliefs that significantly reduce costs when selling their businesses. Business owners pay a reduced CGT rate of 10% on gains up to £1 million, compared to the standard 20%. This relief has been a significant incentive for those willing to take the risk of starting and growing a business.

However, reports suggest that the Government may consider raising CGT as part of its efforts to boost public finances. The FSB has warned that such a move could discourage entrepreneurship, diminishing the financial rewards for taking on risk. The group calls on the Chancellor to maintain the current CGT relief, arguing that many small business owners would find ventures less attractive without it.

Easing Employment Costs

The FSB's concerns extend beyond CGT. In its pre-budget submission, the organisation has also put forward recommendations to ease the burden of employment costs on small businesses. Key suggestions include:

• Reintroducing statutory sick pay rebates: This would allow small businesses to reclaim the costs of statutory sick pay, which can place a significant financial strain on small employers.

• Increasing employment allowances: By raising the employment allowance, small businesses would see a reduction in their National Insurance (NI) contributions.

• Reforming business rates: Business rates are a longstanding issue for small businesses, and the FSB is calling for further reforms to protect smaller firms.

• Limiting personal guarantees on loans: SME owners often face pressure from lenders to provide personal guarantees when borrowing money. This liability can put their homes and other personal assets at risk.

Hope for a Business-Friendly Budget

The Confederation of British Industry (CBI) has joined the FSB in raising concerns. The CBI submitted its own recommendations, emphasising the need for a budget that bolsters economic growth.

The CBI has highlighted the importance of reforms to the apprenticeship levy, making it easier for small businesses to invest in training and development. They also advocate for non-taxable health support, supporting smaller firms in managing workforce health and reducing absenteeism.

The CBI's call for a "business tax roadmap" is particularly relevant for small business owners. Such a roadmap would provide long-term clarity, enabling SMEs to plan their investments and growth strategies with confidence.

What This Means for SMEs

Potential changes in the upcoming Autumn budget could have significant implications for small business owners. Any increase in CGT or additional business levies could shift the balance of risk vs reward when starting a small business. Reforms to sick pay, employment allowance and business rates could offer some much-needed relief.

The FSB and CBI's recommendations reflect the broader sentiment in the business community: small businesses need support, not more tax. For entrepreneurs, keeping an eye on news surrounding the budget and understanding how it may impact their operations will be crucial.

In the meantime, small business owners should continue to focus on managing their costs and exploring ways to remain competitive. While the budget’s outcome is uncertain, preparing could prove invaluable.

Financing Operational Shifts

At BusinessComparison, we can help SMEs move with tax changes by securing the most suitable business finance option. Whether your business faces increased operational costs or a growing wage bill, a tailored business loan could solve your financial challenges.

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