Posted by 
On October 30, chancellor Rachel Reeves used the government’s first fiscal event to outline how it would raise £40bn in tax revenues, in part to fund investments in public services, infrastructure and other areas which it says will support long-term economic growth.
Labour’s pre-election promise was that it would not increase taxes for what it described as ‘working people’, meaning an increased tax burden on the UK’s businesses, including its 5.5m small and medium companies (SMEs).
Whether viewed positively or negatively, the budget statement is always met by a rush of immediate commentary and market reaction in the following days – but as the dust settles, what will the key measures mean for SMEs in Lancashire in the coming years?
Nothing new
As I reflect on the key business announcements, there are very few positive changes for business – no innovative solutions to encourage or stimulate growth, or even indeed encourage entrepreneurs to start a business.
However, there were rumours preceding the budget that several business-friendly measures were to be scrapped or reduced – so simply maintaining these may warrant a small sigh of relief among Lancashire business owners.
I have analysed the key policies which affect Lancashire SMEs and grouped these into what could be considered a win or a loss.
The wins:
Corporation tax cap and Corporation Tax Roadmap: The budget included a cap on corporation tax at 25 per cent for the duration of the parliament. The government also published its Corporation Tax Roadmap, which includes maintaining most capital allowances and R&D relief. One of the key commitments is retaining the small profits rate and marginal relief. This allows businesses to reduce corporate tax through marginal relief if profits are lower than £250,000.
Verdict: Tax stability helps businesses to make more informed decisions about investment and
possible expansion.
Business Rates Reduction: Proposed reduction in business rates for the high street retailers, the hospitality sector and leisure sectors (this hopes to level the playing field between physical shops on the high street and online retailers).
Verdict: This will be welcome news for the embattled hospitality and leisure sectors.
Business Asset Disposal Relief (Also known as Entrepreneurs’ Relief), which can help individuals reduce their Capital Gains Tax liability when certain business are sold, this also includes certain assets and shares. This will remain at £1m after concerns prior to the budget that it may be scrapped altogether.
Verdict: This will encourage entrepreneurs to invest or re-invest into a business.
Employment allowance: This will increase from £5,000 to £10,500 which is said to mean 865,00 eligible small businesses will not need to pay national insurance. However, with 5.5m SMEs across the UK, does this policy reach and benefit enough business?
Government procurement: To help small businesses deal with late payment of invoices, from October 1, 2025, companies bidding for government contracts over £5m per annum will be excluded from the procurement process if they do not pay their own suppliers within an average of 45 days.
Funding for small businesses: More than £1bn will be provided in 2024-25 and 2025-26 to the British Business Bank to ‘enhance access to finance for small businesses’, including over £250m each year for Start Up Loans and the Growth Guarantee Scheme.
The Losses:
National Insurance contributions: Increases in additional employment liabilities including employers’ NIC will place an increased financial burden on businesses against a backdrop of ever-increasing costs. From April 2025, Employers’ National Insurance contributions will increase by 1.2 percentage points to 15%.
NIC threshold: The secondary threshold, the point at which employers start paying National Insurance on a worker’s salary, will be cut from £9,100 a year to £5,000.
Minimum wage: The increase in the minimum wage will add further to this burden. It increases from £8.60 to £10 per hour for 18- to 20-year-olds and £12.21 for over 21s.
Worker impact: Some experts believe the National Insurance increase will not only have a detrimental effect on businesses – but also to workers. The rise in cost for businesses may see SMEs reducing this elsewhere. In some cases, they may be forced to reduce employee pay or make redundancies.
Offsetting the tax burden?
By simply listing the announcements, it may appear to be there are a number of favourable policies introduced or maintained, however the increased financial burden which the NICs and minimum wage will bring, in particular, presents challenges for Lancashire SMEs.
Do the policies go far enough to help offset this significant increase in employment costs? Or are businesses simply picking up a major part of the £40bn tax tab?
Careful financial planning will be more crucial than ever for Lancashire business owners and managers over the coming months.
This feature was brought to you as part of a partnership series of stories about business in and around Preston, celebrating start-up and scale-up businesses in and around the city, in conjunction with Boost Lancashire. If you’re thinking of starting up a business or want help growing your existing business then speak to Boost Lancashire or give them a call on 08004880057 or email them to discover all the ways they can help your business ideas to grow.
They also provide Boost Access to Finance a fully-funded service, led by Lancashire County Council which gives businesses access to a team of finance experts who can help them review their finances and financial strategy as well as working with them to find and secure growth finance.
