In her Autumn Statement earlier today, Chancellor Rachel Reeves pledged to make it easier for entrepreneurs to “start, scale and stay in the UK”. She promised that Labour was committed to backing business, supporting the risk-takers who create the lion’s share of UK jobs. But one accountant said: “Today’s Budget delivers a clear stealth tax on UK business owners.”
Reeves’ business-boosting policies consisted of tax changes to incentivise greater investment into scaling companies, a new UK Listing Relief from Stamp Duty Reserve Tax, and reforms to the UK research and development system.
Reeves also promised to permanently lower business rates for retail, hospitality and leisure, and encourage councils to support the Great British pub.
However, what she gave with one hand, she swiftly took away with the other; a slew of “stealth taxes” have left the UK business community reeling.
As Simon Thomas, a chartered accountant and managing director at Ridgefield Consulting, points out: “Today’s Budget delivers a clear stealth tax on UK business owners. Despite claiming no rise to income tax or NICs, the government is increasing the burden by raising tax on rental income, dividends and savings by 2 percentage points, which are key income streams many owners depend on to reinvest and stabilise their businesses.”
More pain for SMEs
These changes heap misery on an already beleaguered SME community, coming on top of last year’s employers’ NICs increase. Thomas warns: “The new £2,000 cap on salary-sacrifice pension contributions further limits legitimate planning options and increases effective taxation. These measures reduce post-tax income, squeeze cash flow and restrict the capacity to grow, hire and build resilience.”
As costs rise, more business owners will be forced to hit pause on hiring plans, outsourcing jobs that once belonged to humans to AI platforms instead.
“Inflation, frozen income tax bands, dividend tax increases, higher employer NICS and reduced corporation tax allowances create an impossible equation: cut staff, boost automation, increase risky AI deployment or watch profit margins collapse,” explains AI expert Colette Mason, a consultant at London-based Clever Clogs AI.
In her Statement, Reeves pledged to support the UK’s AI industry. The minimum wage increases do just that, according to AI entrepreneur Martin Port, founder of customer engagement platform Build Concierge. “The hike makes it harder for businesses to take on staff for entry level roles in areas such as admin, which is an area we are looking to disrupt,” he says.
“As a proponent of ethical AI, where we support humans, not replace them, it’s a shame that the government is making people increasingly uncompetitive as a resource.”
Mason adds: “UK business owners with tech expertise may navigate this transition, but for NEETs, gig economy workers, and middle managers whose roles are increasingly automated, the outlook is bleak.”
Double-whammy of tax hikes
Some business owners like Kate Allen, owner of Kingsbridge-based tourism business Finest Stays, have been hit with a double whammy of tax hikes. She runs a portfolio of holiday homes, and landlords have just been hammered with a 2% increase to property income tax from April 2027.
Allen has no choice but to pass on these costs to her customers. “When you increase tax on property income, dividends and savings at the same time as freezing personal tax thresholds, you’re effectively eroding their real return, even if rental income stays the same.
“It means UK business owners have to work twice as hard just to stand still. For agencies like ours, it ramps up pressure to deliver even higher booking values simply so owners can cover rising costs.”
Labour may have scored a win with its kite-flying in recent weeks; many of the policies floated would have hurt entrepreneurs much more than the ones announced today.
The mood music amongst entrepreneurs is that this Budget has neither helped nor hindered them long-term. “Overall, Labour needed to be strategic,” says Steve Witt, co-founder of Not Just Travel. “They couldn’t introduce too many divisive changes without alienating the population. As such, this has been a neutral Budget.”
Photo by Possessed Photography on Unsplash
