George Osborne’s Summer Budget was not great news for businesses. Certainly there was some good news – reduced corporation tax, increased income tax allowances, raising the higher rate of income tax threshold and the increase in the national insurance employment allowance are all to be welcomed.
But for many businesses the bad news probably outweighed the good, and it is small businesses that will be hit the hardest.
The increase in the minimum wage (or the introduction of the national living wage – take your pick) by over 10% in April next year, and rising further in the years that follow, will introduce a substantial additional cost for businesses in certain sectors, particularly the care sector, hospitality/leisure and, to some extent, retail. In addition the Chancellor announced a hike in insurance premium tax from November, once more raising costs.
This comes on top of the things we already knew about. For example, smaller companies are approaching the staging dates for the introduction of auto-enrolment, with minimum employer contributions of 1% initially, rising to 3% by 2018. Business rates are expected to rise year on year, with the twin uncertainties of a revaluation in 2017 and a review of the business rates system, which will be “fiscally neutral” – in other words there will be as many losers as winners.
Sadly, that wasn’t the end of the bad news for business owners. The reform of the tax payable on dividends will mean higher tax bills for those business owners who have been able to reward themselves by drawing dividends as opposed to paying themselves a salary.
And, of course, the Chancellor’s pretext for increasing the minimum wage/introducing the national living wage, was to allow him the scope to reduce tax credits. Which is fine unless you happen to be a self-employed person reliant on tax credits. Unfortunately there’s no-one to pay you a higher minimum or living wage. Just as the UK starts to become more entrepreneurial, and the self-employed sector expands, so Mr Osborne removes a support which is essential for some.
So with costs increasing, and probably few businesses able to increase prices to compensate, there is a serious risk that we will see an increase in business failures in coming months and years.
Could it be your business? If your business starts to struggle it’s vital to take advice as early as you can. It’s probably too late when you receive a winding up petition and the bank won’t pay the wages. Our team at tri group has vast experience of dealing with businesses of all shapes and sizes, and solving problems from the most straightforward to the complex. Call us for a free, no obligation conversation.