All eyes are on Treasurer Jeremy Hunt’s budget announcement on Wednesday, as it is likely to be the last major fiscal event before the next general election.th march. UK businesses in particular will be watching closely to see how any changes will affect their day-to-day operations following a series of economic hardships.
After the disruption caused by COVID-19, small businesses across the country had little time to reset. No sooner had the pandemic ended than Russia’s invasion of Ukraine, the cost of living crisis and rising inflation began to further hinder British businesses. Small businesses across the country will be hoping for good news from the government, with news of last month’s attack on a transport ship by the Houthis also leading to rising costs for British businesses.
The Autumn Budget was a mixed bag for business owners, with positive changes such as making full spending permanent offset by an increase in the National Living Wage. But while businesses will likely be looking for some support in the form of a lucrative Spring Budget, what are the chances they will actually receive it?
What are the chances of tax reduction?
If there was ever a time to expect tax cuts, it’s probably now. Historically, the final budget before a general election announces cuts that please the public, followed by another hike in the first budget. Opinion polls suggest the Conservatives may not come to power in the next budget, but this may only make it easier to introduce cuts they themselves don’t need to make.
The Conservative Party has recently been keen to promote its image as a “low-tax” party. At the World Economic Forum in Davos, Mr Hunt even suggested he was open to further tax cuts in the next budget. The International Monetary Fund (IMF) has warned against this, suggesting that cuts, if made, will probably need to be reversed quickly. But that may not deter the Prime Minister’s plans, as Labor may be in the ascendancy by then.
What do UK businesses expect?
There are a number of changes that could make life easier for struggling UK businesses, and some rumored announcements could have a positive impact if implemented. Bel Turpin, Business Development Manager at Turpin Accounting Services, explained: “Recent tax changes have sparked debate among small and medium-sized enterprises, with particular focus on raising the thresholds for tax credits that provide relief, financial burden relief and investment flexibility. Reductions in national insurance contributions are also welcomed as they will reduce operating costs and stimulate economic activity.
“Increasing the VAT threshold will benefit small and medium-sized enterprises, allowing them to expand before facing a VAT payment, reducing administrative burdens and encouraging entrepreneurship. Meanwhile, a fuel tax freeze would reduce operating costs for transport-dependent businesses and provide stability amid fluctuating fuel prices.
“Proposed changes to child benefit thresholds that address the inequity of current household awards, which aim to reflect individual parents’ incomes rather than household incomes, have been welcomed by small business owners. Future business rates reform could also provide relief to struggling businesses, ease financial burdens and promote resilience.”
Which industries may be affected?
Elsewhere, there are whispers of changes coming that may impact certain industries. According to reports, e-cigarettes may be subject to the same taxes as cigarettes. This may force sellers to absorb these fees at higher prices, potentially leading to lower customs charges.
There was even a commotion that suggested the possibility of an increase in business class passenger requirements. This will cause airlines to closely monitor developments in Wednesday’s budget in case the industry is affected.
Apart from these two changes, there is also the possibility that the VAT retail export regime will be reinstated. This system, which allowed international travelers to enjoy tax-free shopping, was withdrawn at the end of 2020. The withdrawal of the scheme has since been heavily criticized, with negative impacts on the retail and hospitality sectors as a result of the changes. Heathrow Airport is the latest in a series of protests against the withdrawal, so it would be no surprise if a withdrawal was announced.
Are you worried that your upcoming budget will hurt your business?
You are certainly not alone. Thankfully, there are steps you can take to make things easier. Whether you’re renegotiating debt, restructuring your business, or going out of business and starting over, we have the right solution for every business.
We’ve helped countless companies navigate difficult situations, and directors across the country trust us to provide honest and effective advice. Businesses across most sectors are currently struggling with rising inflation, a cost-of-living crisis, and rising utility costs. Call us on 0800 975 0380 or email us. [email protected] To find out how we can help, contact us for a free consultation.