The recent landslide victory of the UK Labour Government has sparked much discussion about its potential impact on the small business community. As policies begin to take shape, it is important to understand the changes that may lie ahead. Here’s a brief glimpse at how small businesses might be affected by the new government’s plans.
Income Tax – Stability for Small Business Owners
Labour has firmly committed to not increasing personal taxes for ‘working people,’ which includes the majority of small business owners. This promise is likely to provide some reassurance that personal tax rates will remain stable. They have pledged to keep tax thresholds frozen until 2028. This continuity offers a degree of predictability for business owners planning their financial futures.
Capital Gains Tax – Speculation and Potential Changes
While Labour has not made specific announcements regarding Capital Gains Tax (CGT), except for ruling out changes to Private Property Relief on the sale of an individual’s home, speculation remains that CGT could be targeted to increase government revenue. This is because CGT is not viewed as a tax on ‘working people.’ For those planning to sell their businesses, this potential increase is significant and warrants close monitoring.
Business Tax and VAT – Promises of Stability
Labour has pledged not to increase Corporation Tax or VAT, providing a stable tax environment for businesses. Before Labour’s win, the Shadow Chancellor also advocated for the expansion of tax relief schemes such as the Seed Enterprise Investment Scheme (SEIS) and Research and Development (R&D) tax credits. These initiatives aim to facilitate start-ups and support innovation, which could be highly beneficial for new and growing businesses.
HMRC – Enhanced Enforcement and Its Implications
The Labour Government plans to enhance public finances by bolstering HMRC’s ability to collect unpaid taxes. This will likely involve increased investment and resources for HMRC. While some accountants may view this negatively, seeing it as increased scrutiny on small businesses, it could level the playing field by ensuring all businesses adhere to tax regulations. Moreover, better-resourced HMRC might reduce the administrative burden on compliant businesses by improving efficiency.
Employment Law Reforms – Get to Know the New Regulations
Labour’s intention to reform employment rights is clear, though specific promises are yet to be detailed. The introduction of tighter regulations and enforcement is anticipated, focusing primarily on preventing exploitative employment practices. While this aims to protect workers, small business owners might face additional regulatory burdens, creating perceived and real risks. Staying informed and prepared for these changes will be essential.
Business Rates – Easing the Burden
Labour has committed to reducing the burden of Business Rates on physical businesses, with a promise to overhaul the current system. Although details are scarce, it is likely that the new regime will incorporate e-commerce businesses into the business rates framework. This shift could offer relief to brick-and-mortar establishments struggling under the current rates.
Late Payment Legislation – A Boon for Cash Flow
One of the more welcome changes Labour has promised is the introduction of legislation to tackle late payments to small businesses. This issue, which affects a significant portion of the business community, can severely impact cash flow. Effective legislation could provide timely financial relief and stability for many small business owners.
Public Contracts – Simplified Access
Labour’s manifesto includes a pledge to simplify the process for small businesses to tender for public sector contracts. Although previous attempts have seen limited success, this initiative could open new opportunities for small businesses to engage with government projects if implemented effectively.
EU Relations – A Cautious Approach
The new government presents an opportunity to reset relations with the EU, yet Labour has ruled out rejoining the Single Market. As many trade barriers are still being established, significant changes to current import and export challenges are not anticipated immediately. Small businesses involved in international trade should continue to adapt to the evolving landscape.
Economic Growth – Focus on Green Investment and Skills
Labour is vocal about boosting economic growth through investment in the green economy, skills training, and improved access to business finance. While the potential for growth is promising, many commentators remain skeptical about the actual impact of these initiatives. Small businesses should watch these developments closely to capitalise on new opportunities.
Tackling Anti-Social Behaviour – Prioritising Community Safety
Addressing anti-social behaviour and criminality, particularly in High Street areas, is a priority for Labour. This commitment to improving community safety could positively impact small businesses by creating a safer and more inviting environment for customers and staff.
Conclusion – Adaptability and Optimism
The small business community is known for its resilience and adaptability. Regardless of which party is in power, business owners are likely to find ways to thrive. Overall, the change in government brings a mix of challenges and opportunities, with a general sense of optimism that Labour’s policies could be beneficial for the small business sector. As always, staying informed and adaptable will be key to traversing the changes that lie ahead.
