Today’s pre-budget statement by the Chancellor will have done little to ease the fears of the general public that tax increases are on the way, but there were some crumbs of comfort for small businesses.
In making the rare pre-budget speech ahead of the 26th November Budget, Rachel Reeves outlined that some reforms to the business rates system would be coming, aimed at easing pressures on physical shops and small businesses.
“The current business rate system was designed for a previous age, not for a digital age,” said Reeves. “And so we’ve been reforming the business rate system to hopefully give a bit more comfort to small businesses and high street businesses as well.”
While SMES will have to wait until the official Autumn Statement for the full detail of what this will mean for them, the rest of the country will be wondering how far the Government is going to go as far as breaking their manifesto pledge not to raise taxes on working people.
Increases to income tax, national insurance or VAT could well be in the offing, potentially putting the majority of the burden on the general public. For businesses impacted by national insurance hikes in the previous budget, it is unclear whether any tax changes will negatively impact them.
The Chancellor’s statement largely blamed the previous government for many of the financial problems facing the country, but it has been clear for some time that the huge financial blackhole in UK finances needed to be addressed sooner rather than later. In making tax promises in their manifesto – and seemingly looking to go against this – this will have the inevitable negative impact on the markets and business confidence.
For your employees, they are now likely to be concerned about any potential increase in income tax. Already, the freeze on income tax thresholds, due to expire in 2028, looks set to be extended once more. This will take many more employees into higher tax thresholds as earnings increase, leading to increased pay demands.
If the Chancellor raises the higher rate of income tax, this will impact on some of your higher earners. However, an increase in the basic rate of income tax – the first since 1976 – could lead to employers, who are already facing wage demands from employees due to persistently high inflation, facing increasing wage pressures from those they employ.
If you want the low-down on Rachel Reeves Autumn Budget statement, join Prosper²’s Budget Webinar on 27th November (11am). You’ll get an in-depth exploration of the new fiscal rules and how this will impact yourself, your business and your industry. Register for the webinar now.
