Budget: the entrepreneurs' view
"No good news"
As expected, there is no good news for entrepreneurs from the Autumn statement. What was expected was the level of bad news - spending cuts and tax increases levied on businesses. I believe it was a balanced approach in such a difficult time for the UK economy where we do expect our economy to shrink next year but then bounce back the year after.
I do understand that tough measures and financial prudence are required to get us back to growth in the long term. For that, I, like most entrepreneurs, am prepared for the pain in the short term. I quite appreciated the statement about the continued investment in infrastructure, healthcare and education, which will require products and services from local businesses as part of the expansion plan. It would have been nice if the dividend tax allowance was left untouched, but I see how the Government is trying to balance the budget.
As we are officially in recession, it is never a better time to be an entrepreneur and create products and services by becoming leaner and more efficient. As bigger and more established businesses cut costs, entrepreneurial business owners see opportunities to get better talent, create more jobs, get bigger premises, negotiate better deals with suppliers and make their businesses more agile.
Sid Jashnani, technology entrepreneur and EO Board Member
"Doesn't go far enough"
Very few surprises in the chancellor's budget which is clearly by design after the shockwaves of the mini budget. As a business owner, I’m grateful for the relative calm and stability this budget will achieve but my feeling is the bar for that gratitude is awfully low. What’s missing for me as an entrepreneur and creator of jobs is an incentive to keep investing and to continue creating jobs in the UK. Business owners have endured a torrid few years fighting to save their own livelihoods and those of the people who work alongside them in those businesses. The risks and responsibilities entrepreneurs and business owners are expected to face are supposed to be met with the possibility of meaningful reward for that risk and sacrifice. This budget doesn’t go far enough to incentivise more risk or more investment and I think that bodes badly for economic growth and a dynamic business environment.
Rachel Irvine, CEO of Irvine Partners and EO Board Member
"Working people are out of pocket"
The Chancellor noted three priorities by stating that "our priorities are stability, growth and public services". This involves a £55b budget consolidation. There is a lot covered in the statement but the most pressing question that comes to mind is how does this affect me? So that’s what we will focus on.
Let’s first look at the highlights for people on wages. The top rate taxpayers (called additional rate) will be out of pocket by just over £1.2k because the threshold for them has been reduced from £150k to £125k.
The income tax personal allowance, higher rate threshold, main national insurance thresholds and the inheritance tax thresholds are all frozen for a further two years to April 2028. What this means is that as people’s wages rise, because the thresholds will stay the same, they will pay higher taxes.
In our opinion, although these measures eat into the average household income, these measures aren’t as tough as these could go. An optimistic way to look at it can be that the sacrifices households make in taxes will be more than repaid in better social services. Furthermore, National Living Wage will be increased from £9.50 an hour for over-23s to £10.42 from April next year which is worth over £1.6k per year.
Now let’s look at the businesses. There is particularly tough news for the oil and gas companies with the increase of windfall tax to 35% from 25%. For smaller businesses, however, the relevant news is that the tax-free allowance for dividends is cut from £2k to £1k in 2023 and to £0.5k in 2024. There was no mention of any changes to corporation tax rates already announced previously whereby it rises to 25% from April 2023. The other measure the Chancellor announced is to start revaluation for business properties from April 2023 which effectively will increase the business rates.
Again, in our opinion, these measures could have gone further than announced. We think these measures are well balanced to minimise the impact on businesses.
Other important news is that the electric vehicles will no longer be exempt from vehicle excise duty from April 2025. Support for energy bills will remain in place, state pension, benefits and tax credits will rise 10% in line with inflation.
So, in summary, we think that although unsurprisingly the people end up paying higher ‘stealth’ taxes by way of frozen or reduced thresholds, the measures have not gone as far as they could. This doesn’t take away the fact that working people will be out of pocket in the face of rising cost of living. One measure we would have liked to see is the chancellor making the banks, and the large financial companies, contribute more too.
Sarfraz Fayyaz, BizNav Chartered Accountants