The Federation of Small Businesses (FSB) has issued a warning against potential tax increases by Chancellor Rachel Reeves, stressing their potential harm to economic growth.
- Business leaders caution against raising capital gains tax, which could deter entrepreneurial ventures and expansion.
- The current relief allowing entrepreneurs to pay less tax on gains is pivotal for small business owners.
- Suggestions for mitigating employment costs and protecting small companies were also made by the FSB.
- The Confederation of British Industry (CBI) encourages a budget that supports economic growth and clarity.
The Federation of Small Businesses (FSB) has expressed its concern regarding Chancellor Rachel Reeves’ potential consideration of increasing capital gains tax (CGT) and other business-related levies. This proposal, according to the FSB, could significantly impede the United Kingdom’s economic growth and act as a deterrent to entrepreneurship.
Entrepreneurs currently benefit from a capital gains tax relief that permits them to pay just 10% on gains up to £1 million, compared to the 20% standard rate. Business leaders argue that removing or altering this relief could diminish the incentives for individuals to start and grow their businesses, given the increased tax liabilities.
Policy Chairwoman of the FSB, Tina McKenzie, emphasised the importance of avoiding what she termed ‘damaging anti-enterprise tax rises’. In her statement, she urged the Chancellor to adhere to the impression she conveyed during her recent party conference address, where she seemed to oppose substantial tax hikes.
In a bid to alleviate employment costs, the FSB has proposed several measures. They have suggested the reintroduction of a rebate allowing small businesses to reclaim costs associated with statutory sick pay, as well as an increase in the employment allowance to reduce national insurance contributions for small employers.
Furthermore, the FSB has highlighted the need for reforms to protect small companies from burdensome business rates and has called for action against lenders imposing ‘personal guarantees’. These guarantees often compel business owners to risk their personal assets, including homes, when securing loans.
In a parallel submission, the Confederation of British Industry (CBI) has called for the upcoming budget to ‘set the tone’ for UK’s economic trajectory by establishing a credible growth plan. The CBI underscores the importance of reforming the apprenticeship levy and the provision of non-taxable health support, which would aid businesses in retaining and investing in their workforce.
The introduction of a ‘business tax roadmap’, as advocated by the CBI, is seen as essential for providing long-term fiscal clarity, thus enabling businesses to plan and invest with confidence.
Chancellor Reeves faces critical decisions that could shape the UK’s economic landscape, balancing fiscal policies with the need to nurture business growth.
