Six wishes to make this a Budget for entrepreneurs

“Entrepreneurs are key to the dynamism of the UK economy and to driving the much-needed growth and productivity gains that are currently sadly lacking. The Chancellor should therefore make the Spring Budget on March 6^th one that incentivises entrepreneurs and encourages them (and others) to invest in the UK.

“Entrepreneurs need the confidence to make long-term, multi-year decisions that will create jobs and benefit our economy.

“What links the following six Budget wishes is that they could provide a much greater economic return compared to the required investment, as well as help meet the wider aims of supporting entrepreneurs and businesses in Britain, boosting employment and productivity, and meeting environmental objectives.”

1) Cut NIC for employers

National Insurance Contributions (NICs) were reduced for individuals from 12% to 10% at the Autumn statement, but no cut was provided for the NICs paid by employers.

Cutting employers’ NICs across the board would be welcomed by all businesses. If more targeted cuts are required this could be aimed at the first 10 employees for a business or relief in respect of employers NICs for all employees in small businesses. Businesses that are exempt from audit typically have less than 50 employees. Collectively small businesses in the UK employ 13.1 million people or account for 48% of employment, according to the National Federation of Self Employed & Small Businesses.

2) A pledge to bring down corporation tax in the next Parliament

In April 2023 corporation tax was raised from 19% to 25% on profits above £250,000. Given the pressures on public finances, we are unlikely to see this increase reversed in the Spring Budget.

However, announcing a pledge to progressively reduce the rate over the course of the next Parliament, say to 22%, could provide more valuable longer-term certainty for entrepreneurs and business owners if other political parties felt compelled to align similar fiscal policies in their manifestos.

3) Reform business rates

Business rates and employers’ NICs are two taxes that many entrepreneurs dislike the most because they are levied before any income or profit is generated.

The current business rates regime raised £25bn in 2022/23, which equated to 2.4% of total Government revenue. It is antiquated and disproportionately suffered by businesses that use premises in the UK. This has become more evident since COVID, and successive Chancellors have felt compelled to offer temporary reliefs.

The key concern is the unfreezing of the rate multiplier from 1 April 2024. The announcement at the Autumn statement means the majority of businesses will see an increase in their business rates tax liability of 6.7% in 2024 despite the value of the assessment remaining the same. More needs to be done by the Government to review how it levies the annual liability despite rateable value remaining the same. Hence a braver alternative to stop-gap reliefs would be a broader reform to the uniform business rate multiplier.

4) Simplify and incentivise green spending on residential let properties

The Chancellor could align green policies with fiscal policy by allowing 100% tax relief in a year for any work that has an environmental or energy performance improvement.

This idea was proposed by the Office of Tax Simplification (OTS) in its report in October 2022 for residential landlords, shortly after the announcement that the OTS would be disbanded.

Along with incentivising landlords to commission more work on their let properties, this proposal would provide welcome clarity on a complex area of property tax, as well as help the UK meet its Net Zero targets where currently only 40% of UK housing is rated C (energy efficient) or higher on EPC energy efficiency ratings.

5) Extend CGT relief for entrepreneurs

Entrepreneurs are liable for capital gains tax at 20% on profits made from a sale of their business. The main targeted relief, Business Asset Disposal Relief (BADR), enables entrepreneurs to claim a 10% rate of CGT on a relatively meagre £1m of lifetime gains. This compares to a more generous limit of £10m of lifetime gains which applied from April 2011 until March 2020.

A more progressive relief regime to increase this lifetime limit would be welcome. Alternatively, a more targeted rollover relief regime could be introduced to incentivise entrepreneurs to reinvest proceeds, within a certain time period, into new (non-EIS qualifying) business ventures.

6) Make VCTs more attractive

VCTs (Venture Capital Trusts) are investment companies that are listed on the London Stock Exchange and set up to invest in small UK businesses that meet certain criteria. To encourage support for these businesses, and reflect the higher-risk nature of investing in them, the Government offers generous tax benefits for investing up to a maximum investment of £200,00 per annum in VCTs.

There are a couple of ways to make VCTs more attractive and help bring additional capital into the UK economy to unlock considerable potential further funding for small businesses.

• Increase the annual limit on how much an investor can subscribe to VCTs and receive tax credits. This has been stuck at £200,000 since 2004/05 and so is long overdue an increase.
• Increase the level of tax credits, to say 40%, that an investor would receive on making VCTs investments.