Budget relief on rates but a tax grab on the self-employed

  • Extra help for those worst affected by changes in business rates  welcomed by the Federation of Small Businesses (FSB).
  • But many hard-working self-employed people hit with a tax grab in today’s Budget.


Mike Cherry, FSB National Chairman,
gives his assessment on the main Budget announcements:

“FSB welcomes the fact that the Chancellor has listened to the small business-led campaign on business rates. The £435 million of new money is a direct and much-needed response to those facing astronomical hikes in their business rates. This immediate relief is vital in the short-term, and action on more frequent revaluations will also help. But this tax remains out-of-date so today we call for a cross-party Commission to create a simple, fair tax system for a modern economy.

“Mr Hammond announced that he would take forward FSB’s proposals to help the self-employed in the benefits system. We look forward to working with him on what this may mean for maternity benefits and paternity leave.

“However, the National Insurance rise to 10% next year and 11% in 2019 should be seen for what it is – a £1 billion tax hike on those who set themselves up in business. This undermines the Government’s own mission for the UK to be the best place to start and grow a business, and it drives up the cost of doing business. Future growth of the UK’s 4.8 million-strong self-employed population is now at risk. Increasing this tax burden, effectively funded by a reduction in corporation tax over the same period, is the wrong way to go.”

Business rates

“The £300 million discretionary relief fund for local authorities to target those businesses most in need is a very welcome short-term measure – but there is concern that the fund may not be big enough. Many small firms are already receiving their bills and so it is vital that Government and local councils communicate immediately with their local business population to explain how this fund will work. The formula needs to take into account those areas hardest hit in London and in regions across England.

“Businesses set to lose small business rate relief will be helped by the cap of £50 per month set on any increase. In addition, smaller, independent pubs will benefit the most from the proposed £1,000 reduction to their rates bill this year.

“FSB has called for more frequent revaluations. We’re disappointed that this now won’t happen until 2022 at the earliest. In terms of fundamental reform of an outdated system, today FSB calls for a cross-party review, such as a Royal Commission, to consider what a fair, modern business tax system would look like.”

Self-employment

“The genuinely self-employed are fundamentally different to employees – they are the risk takers that spearhead growth and productivity in our economy. They need help and support from Government given the spiralling costs of doing business, not additional tax burdens.

“This measure is a tax grab on middle income self-employed people, who are just about managing. Class 4 National Insurance Contributions (NICs) will apply from about £8,000 to £45,000 in profits. Millions of self-employed will now face this tax hike, including plumbers, hairdressers, designers, musicians and many others in all our local communities. 

“There are many areas where the self-employed don’t receive the same provision as employees to Government funded benefits. Self-employed people also face higher barriers to entry, for example, in relation to access to income protection or mortgages.

“We are pleased that the Government name-checked FSB before announcing a consultation on the maternity and paternity benefits available to the self-employed. The self-employed face many other inequities in the provision of benefits and in the access to other financial products and services. We will work with the Chancellor to ensure the review genuinely addresses all of these.”

Making Tax Digital

“The Government has listened to FSB’s calls, delaying the implementation of mandatory quarterly tax reporting for the smallest businesses with a turnover up to £83,000. It is right, the smallest businesses should be protected from the increased costs and administrative burden as a result of these changes.

“HMRC should now use this time to conduct more user-testing, develop more appropriate software solutions and prepare the business community for relevant changes. The Government has left the annual turnover exemption threshold unchanged at £10,000 which will largely only benefit part-time and hobby businesses. We will use this window of opportunity for a final attempt to convince HM Treasury that a higher threshold is necessary to make sure the system works.”

Dividend taxation

“FSB is concerned about the drop in tax-free dividend allowance from £5000 to £2000 starting in April 2018. In the wake of changes to dividend taxation last year, this is a further disincentive for businesses to invest and grow. Many of our members, including those on modest incomes, will now see a significant rise in their tax liabilities.

“FSB is concerned about the increased uncertainty this may cause across the business community. We would now like clarity over how this fits in to the publication of the Government’s Business Tax Roadmap, which prioritised the importance of creating a stable and certain tax environment for small firms.”

Skills

“It’s encouraging to see skills sitting at the heart of the Government’s plans to boost productivity and growth. As part of this, Government has committed to spending up to £40 million by 2018-19 testing different approaches to help people to retrain throughout their working lives. FSB welcomes this focus on helping individuals – including business owners and their staff to embrace new skills.

“In addition, the Chancellor’s plans to increase spending on T-levels by £500 million per year will hopefully lead to high-quality and coherent technical provision for young people. It should also improve small businesses’ understanding and confidence in these 15 new educational routes.”

Digital infrastructure

“FSB welcomes the creation of a new vouchers programme to provide full fibre broadband connections to businesses. It is, however, important that lessons from the previous scheme are taken on board to improve take-up. Government must work in partnership with organisations like FSB to raise awareness of these opportunities. We are now keen to see how the £200 million set aside for full fibre networks will be allocated across a variety of different schemes.”

Transport

“Today’s £690 million allocation to ease congestion on local road networks comes from the funding set aside in Autumn Statement 2016. Local authorities will now be able to bid for this which will deliver crucial improvements to local road networks. This has consistently been a key priority for FSB members, many of whom rely on local roads to run their business.”

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