The Federation of Small Businesses (FSB) cautions against potential tax increases that could stifle UK economic growth.
- Reports suggest Chancellor Rachel Reeves might raise capital gains tax, which could discourage entrepreneurship.
- Currently, entrepreneurs benefit from a 10% capital gains relief for gains up to £1 million.
- Chancellor Reeves is advised to maintain this relief to ensure small business risks are rewarded.
- The Confederation of British Industry (CBI) calls for a budget that highlights growth and economic stability.
The Federation of Small Businesses (FSB) has issued a cautionary note to Chancellor Rachel Reeves, warning that any increase in taxes on capital gains and other business-related levies could potentially hinder the UK’s economic growth. Such tax hikes could discourage entrepreneurship, which is vital for the economy. Reports have emerged suggesting that the Chancellor is considering raising capital gains tax (CGT), currently levied at lower rates than income tax. Business leaders argue that this might stifle the incentive for individuals to start and expand their companies.
Entrepreneurs in the UK currently enjoy a CGT relief, which allows them to pay merely 10% on gains up to £1 million, as opposed to the standard 20% rate. The FSB is urging Chancellor Reeves to maintain this relief to ensure the risks that small business owners take are justly rewarded. Tina McKenzie, the policy chairwoman of the FSB, remarked, “The chancellor, in her recent party conference address, gave every impression that she would sensibly avoid being lured into damaging anti-enterprise tax rises in the budget, and we urge her to stick to that.”
In its pre-budget submission, the FSB has laid out several recommendations aimed at easing employment costs for small businesses. These include reintroducing a rebate that allows small businesses to reclaim costs associated with statutory sick pay and an increase in the employment allowance, which lowers national insurance contributions for small employers. Additionally, the FSB has called for measures to shield small companies from onerous business rates and for actions against lenders that require “personal guarantees,” potentially putting business owners’ homes at risk when borrowing funds.
The Confederation of British Industry (CBI) has also put forward recommendations for the upcoming budget, emphasizing the need for a “tone-setting” budget that assures the UK has a sound plan for enhancing growth. In their submission, the CBI advocates for reform of the apprenticeship levy alongside the provision of non-taxable health support to facilitate businesses’ workforce investments. This would ideally decrease economic inactivity stemming from health issues. Furthermore, the CBI has proposed the development of a “business tax roadmap” to offer long-term fiscal clarity, enabling businesses to plan and invest more effectively.
The upcoming budget decisions will be pivotal in shaping the economic landscape for entrepreneurs and small businesses in the UK.
