This week, the government will announce its first budget since pandemic restrictions were lifted. We ask SMEs and experts what they want from the spending review.
On October 27, the 2021 Autumn budget is set to be announced, outlining the government’s spending plans for the next 12 months.
It’s a particularly momentous spending review given the many challenges that UK businesses are currently facing. These largely revolve around economic recovery from the coronavirus pandemic – not forgetting Brexit and the ongoing supply chain and gas crises.
Particularly following the end of the Coronavirus Job Retention Scheme (CJRS) or ‘furlough’ scheme at the end of last month, many SMEs are desperate for further business support.
However, the chancellor Rishi Sunak is reportedly looking to take a tighter approach to this year’s budget, igniting worries amongst SMEs that their biggest concerns will not be answered.
As the big day approaches, we asked UK small business owners for their wishlist to learn more about the issues they want the budget to focus on.
What do small business owners want from the budget?
It’s no secret that the past 18 months have been difficult for small businesses. Earlier this year, a report by Simply Business estimated the total cost of coronavirus restrictions to be upwards of £126.6 bn, at an average expense of £22,461 per company.
As such, nearly all of our respondents emphasised the need for greater business support to stimulate an economic recovery in 2022.
Greater support for the high street
The past 18 months have produced a cocktail of challenges for SMEs, and it hasn’t been a palatable one for business bank accounts to swallow.
UK high streets were particularly hard hit by the coronavirus national lockdowns, which saw the entire country told to stay at home and avoid towns and city centres. This wreaked havoc on footfall levels, which dropped completely almost overnight. Figures compiled by the Local Data Company (LDC) show that over 17,500 chain stores were forced to close in 2020.
Because of this, many companies highlighted the need for more support and funding for high street retailers and landlords.
Robert Walton is managing director of The Lindhurst Group, a furnishings supplier. Walton said: “We need measures to support the redevelopment of traditional High Streets to ensure they regain their importance to the local community and contribute to local employment.”
As a suggestion for how to alleviate some of the pressures on the high street, some respondents suggested a reduction in business rate taxes:
Rhys Schofield is managing director at Peak Mortgages and Protection, a mortgage broker. Schofield said: “I want to see one thing in the Budget: the abolition, replacement or radical reform of business rates. I can’t think of a single thing that penalises investment in premises and undermines local business as much as having to pay a fortune in business rates for sweet FA as a return in most cases. This would also level the playing field with the huge internet behemoths like Amazon, who don’t contribute much in tax anyway as a percentage of the income they siphon from the economy.”
Julia Kermode is founder of IWORK, an agency employer. Kermode said: “Millions of people were excluded from the government’s financial support packages during COVID (such as self-employed and people who are paid via their limited company), so we urgently need some redress so that those who fell between the cracks can start to piece together a living.
We also need tax incentives for businesses, such as reduced corporation tax or business rates, so that they have some chance of prospering post-COVID and duly repaying the various government loans that many relied on as “support” during the pandemic.”
National Insurance U-turn
Earlier in the year, the government announced it would increase national insurance by 1.25 percentage points in order to fund social care, which has been particularly hard hit by previous budget cuts combined with the coronavirus pandemic.
The move, a direct violation of the Conservative manifesto commitment, showed that the government is willing to introduce higher taxes. Most of the business owners we spoke to felt that the move should be scrapped, in favour of other increases that would see larger companies paying more towards social care, rather than freelancers and small businesses.
Lewis Shaw is founder of mortgage broker, Shaw Financial Services. Shaw said: “Firstly, scrap the national insurance hike and replace it by bringing capital gains tax in line with income tax rates.”
Alongside the National Insurance increase announcement however, came the news that pensioners would need to pay a 1.25 percent levy in 2022, to ensure that those who were out of work could also fund social care. More support for pension payers was therefore a common request from the small business owners we heard from:
Adam Walkom is cofounder of Permanent Wealth Partners, a financial planning company. Walkom said: “We would love to see simplification of pensions. It may sound boring but will impact 99% of all workers. The lifetime allowance has become a huge disincentive that penalises pension savers, so potentially removing this while introducing a flat rate of tax relief for pension contributions would be a powerful statement from the Treasury.”
Fully-stocked Christmas
Finally, Tom Bowers, founder at media consultancy firm Hypothesis Media, said his priorities lay at the kitchen table. Bowers commented: “I would love to see an additional, highly punitive tax for anyone that contributes to the panic buying of Christmas turkeys.”
What do the experts think?
Lee Murphy is managing director at The Accountancy Partnership, which provides online accounting services. Murphy gave his predictions over what the budget will include: “We would hope to see financial support for small businesses in some form introduced, whether that is a revised approach to business rates, grants or investment schemes. Rebuilding from the pandemic is not going to be instant, and with ongoing adjustments following Brexit, the government needs to recognise the importance of the small business community’s contribution to the overall economy and allocate budget accordingly.
“The usual tax rate and threshold changes will likely be announced. With the debt generated by the pandemic, these are likely to be higher than ever, reinforcing the need for small businesses and their owners to be supported. The ending of the furlough scheme may present issues for businesses that are struggling to meet pre-Covid levels of demand, but hopefully this will alleviate some pressure on the employment market.
“The tax basis period reforms have been delayed, as well as the rollout of Making Tax Digital for Income Tax, which has now been pushed back to April 2024. We expect that the Chancellor will give further details on this and updates on Making Tax Digital for Corporation Tax, which will allow small businesses to start to explore how this will affect their business.”
On Wednesday 27 October we’ll be live-blogging the Autumn Budget to bring you all the information on small business legislation, as it’s announced. Join us then for our expert breakdown.
