A leading accountant says he is seeing ‘anxiety like never before’ among business owners as they brace themselves for a battering in the upcoming November Budget.
Paul Hornby, the Managing Director of JF Hornby & Co, believes the UK may be heading for a repeat of the 1970s, when taxes were notoriously high.
Fear of the unknown, amid rumours of what may be unveiled later this year – and on the back of a bruising Budget for business in 2024 – is causing acute uncertainty in the SME market, he said.
Paul added: “Every conversation I’ve had over the last few weeks has been filled with concern and panic – people are genuinely worried about the future. I’m not sure how much more the people of this country can be taxed.”
The Chancellor, Rachel Reeves, will deliver the Budget on Wednesday 26 November, setting out the government’s fiscal plans for 2026 and beyond. The date was confirmed by HM Treasury earlier this month.
Paul says anxiety is being stoked by a steady drumbeat of speculation.
Among the concerns doing the rounds in the tax world is the possible removal or restriction of the £175,000 residence nil-rate band for inheritance tax – a change that would reduce the amount a couple can pass on tax-free from £1 million to £650,000.
Dividends are another potential flashpoint, with speculation dividend tax may be aligned with standard income tax – pushing the basic dividend rate from 8.75% to 20%. The £500 tax free dividend allowance is also in danger.
With pensions also in the crosshairs – there are suggestions the Chancellor may cut the 25% tax-free lump sum or flatten tax relief – and Capital Gains Tax and Business Asset Disposal Relief both vulnerable to attack, Paul is fearful for his clients.
“Changes to pensions of the scale being mooted would throw long held retirement plans up in the air, causing chaos and distress. Money saved over decades would suddenly become fair game. That’s not fair – and it’s not right.
“If CGT goes up again, it will punish entrepreneurs when they finally sell after years of hard work.
“I believe we may get to the point when those considering setting up a business decide not to. The risk to reward ratio is getting ever slimmer.”
An ace up Reeve’s sleeve is feared to be a drastic reduction in the VAT registration threshold.
“Dropping the threshold to £30,000 which is one of the pre-budget rumours would be a total disaster,” said Paul. “For consumer-facing micro-businesses it’s impossible to pass on and would heap pressure on owner-managed businesses already contending with higher costs.”
Reeves’ Autumn Budget 2024 was Labour’s first in more than a decade and set the initial direction of travel for the Parliament.
Paul’s verdict is blunt: “The UK hasn’t seen anything like this since the 1970s. Until we see the small print on 26 November, my advice is to scenario-plan for the worst now and avoid nasty surprises later
“Then all we can do is hope for the best.”
