• Swindon & Wiltshire Economy
• Thursday October 31 2024
• Author Name: Peter Davison

Business world responds to Labour’s first Budget in 15 years

Chancellor Rachel Reeves has delivered Labour’s first Budget in 15 years – and perhaps the most hotly-anticipated financial statement in as many years. As always, there are winners and losers. Business Biscuit has gathered a host of experts around its virtual coffee table to make sense of it all.

Chambers of Commerce were disappointed that in a bid to protect “working people” from tax increases, the burden has fallen on businesses instead.

Phil Smith, managing director of Business West, said: “We recognise that the Government faces a tight fiscal position and has had to make hard decisions.

“However, we are really concerned that raising the tax burden on the business community could hinder the Government’s much sought-after growth and undermine investment decisions.

“Through our quarterly economic survey, businesses have told us that rising taxes are an increasing worry.

“Employer NIC increases will leave companies with less money to invest in their staff and business’s success.”

“We welcome measures for small businesses such as changes to the employment allowances, and business rate relief for our region’s retail, hospitality, and leisure sectors.

“However, such fine margin industries, where employment costs form a large share of their cost base, will be disproportionately impacted by these extra employee contributions.

“Our region has a strong economy that plays a key role in the UK’s overall economic success. We welcome the Government’s commitment to ‘invest, invest, invest’ in our country through the Government’s seven key pillars of economic growth, particularly commitment to supporting our region’s vital industries, such as aerospace, advanced manufacturing, creative industries, and clean energy.”

And Paul Britton, CEO of neighbouring Thames Valley Chamber of Commerce, said: “This was trailed as a tough budget and local businesses have already been hanging fire according to our most recent survey, with almost half of businesses more concerned about tax rises than three months ago.

“Early signals from the budget today are that most businesses will be hit by the NI rises, and this could mean they continue to pause or row back on planned investment.

“Time will tell whether this budget has built confidence or added to the anxiety that was already there. There is a lot to shake down in terms of the details on incentives, new costs and threshold changes for NICS but businesses will feel they are carrying the weight heavily of a new plan for renewal.

“As the engine of growth, exporters are missing from the budget and majority will be medium-sized businesses, there was no protection, re-assurance or incentive for them”.

“The investment in further education, business rate concessions, and the pledge to join up services across government departments were among the positives.

“Government should use between now and the spending review in the Spring to develop policies to support local businesses, especially for those companies trading internationally and investing in their workforce.”

Meanwhile, the Chancellor gave a shout-out to the Federation of Small Businesses when she announced an increase in Employer Allowance.

“Increasing the employment allowance for small businesses by a record amount is a welcome move and we’re pleased the Chancellor has heard us loud and clear,” said the body.

“More than doubling it, from £5,000 to £10,500, will shield the smallest employers from the jobs tax, therefore is a pro-jobs prioritisation in a tough, tax-raising Budget,” said policy chair Tina McKenzie.

“The true test of today’s Budget will be whether small businesses can grow and end the economic stagnation the UK has been stuck in.”

Many on the left will be disappointed that there was no direct wealth tax, but from new regulations for non-doms to VAT on public schools and changes to Capital Gains Tax, wealthier citizens did not escape the Budget unscathed.

Hannah Hopkins, senior manager in personal tax at Albert Goodman, said: “Non domiciled taxpayers should not be surprised by the changes in today’s budget.

“From an income tax perspective, the extension of temporary repatriation relief will allow clients more time to plan if they wish to remit funds to the UK at lower tax rates. This will be beneficial for many people to allow them to make investment and business decisions considering the changing global economies.

“The move to a residency based scheme is seem by some as a simplification of the rules and making it easier to follow the rules.

“Apart from the most wealthy taxpayers, the remittance basis has been a scheme only used for the first seven years, after which the £30,000/£60,000 yearly charge made it unusable for most taxpayers.

“For clients that we work for across the South West this allows time for discussions around business and personal plans.

“Some are considering a move abroad but this may allow others the ability to spend additional time in the UK.”

Hannah’s colleague Andrew Law, director, in corporate tax, said: “From a political standpoint, it seems a logical step for the government to raise Capital Gains Tax so that there is less disparity between Capital Gains Tax and Income Tax.

“This adjustment answers some of the biggest questions facing Labour at the moment as to whether the wealthy are paying enough towards their tax liabilities.”

Drilling down into some of the detail, Mike Lloyd, managing partner at Haines Watts in Swindon, said: “Whilst having been preceded by more leaks than your average kitchen colander there was still a great deal to absorb and of course there will be still more that didn’t make the speech.

“On the tax side, stand-outs for me included the expected increase in employers’ NIC to which was added a reduction in the level at which these commence.

“I know that some of my business clients before today were struggling as to how this was not an increase on them as they are very much working people.

“There was some relief for small businesses though in the doubling of the employer’s allowance to £10k per annum. Capital gains tax rates will increase across the board, including for the Business Asset Disposal Relief

“Increases in inheritance tax by way of partial removal of agricultural and business property relief will raise questions as to how this tax will be paid without breaking up or selling businesses. Additionally, the exemption to inheritance pensions will be reversed.”

And Rob Stokes, director at Swindon-based Optimum Professional Services, said: “As expected, the Chancellor revealed increases in employers’ National Insurance.

“This, along with the increase in the National Minimum Wage, makes for hefty additional outgoings for employers. Increasing the Employers Allowance will help soften the blow for businesses with only a few employees.

“The wage rises alongside National Insurance increase, plus alcohol duty on non-draft alcohol and sugar duty rise, will have a massive impact on the hospitality industry that is already struggling. Throw in employee law reforms and it’s looking a lot bleaker for that sector.

“Also as expected, Stamp Duty Land Tax on second homes has increased which will have implications for landlords and affect investment strategies, but at least the Capital Gains Tax on gains made from the sale of second homes has stayed the same.”

Wealth manager Dave Southby of Dave Southby Financial Planning added: “We all knew there were going to be some ‘tough choices’ in this Budget which translates to tax rises.

“Having committed to not increasing Income Tax & employee N.I, we knew there was going to be tax increases elsewhere so the result wasn’t far from expectation.

“While employer NI is rising from 13.8 per cent to 15 per cent, the increase in Employer Allowance from £5,000 to £10,000, may help some smaller businesses.”

Dave also picked up a note on inherited pensions: “Inherited pensions will be brought into inheritance tax from April 2027 – this will have big implications to many people as currently pensions can be passed on tax free if death is before 75 and at the beneficiary’s marginal rate of income tax after 75.

“This will push many individual’s estates into a position where they will have an IHT liability so more careful planning will be required.”

And on the effect that rising employers’ liabilities might have on the jobs market, Mark Buscombe, principal consultant at CMD Recruitment, said: “For some businesses, this could signal a review of headcount and employee contracts.

“With the rise of employers’ NI contributions and the National Living Wage, it may be a more attractive option to switch to ongoing temporary staff, so there is no long-term commitment.

“I was surprised by the reverse on employee rights, maternity leave, etc., that was rumoured to be happening, but I think the government leaked that early to gauge the reaction and then made a U-turn.

“2024 has been a challenging market, and employer allowance and employer NI in coming into play next year I think some businesses will be reviewing total headcount before any moves.

“It is also good to see the government cracking down on mini umbrella companies, as this is seriously hampering our market with workers missing out on fair pay with holiday and NI rolled into their hourly wage.”

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