Supporting small businesses means supporting UK economic growth. However, this budget, while offering some beneficial adjustments, risks overburdening small businesses with new costs and tax obligations that could slow growth, limit expansion, and curb hiring.

National Insurance and minimum wage hikes

A primary area of concern is the announcement of a 1.2% rise in National Insurance contributions for employers, bringing the rate to 15%. For small businesses, this uptick compounds existing financial pressures from elevated operational costs and inflation-driven supply chain increases.

Additionally, the rise in the National Minimum Wage to £12.21 for adults over 21 is a welcome move in supporting low-income workers, but for small businesses, these combined increases in employment costs may threaten financial sustainability. While we fully support fair wages, these costs will force many businesses to make challenging choices, such as reducing hiring or even passing costs onto consumers

In an environment where small businesses already face high borrowing costs, these additional employment expenses will, for many, slow business growth. We are already seeing companies expressing concerns about forecasting these changes into their long-term financial plans, which could affect investments in innovation and expansion. The government must recognise that small businesses operate on slim margins; without proper relief, these policies risk stalling growth rather than catalysing it.

Relief from employment allowance and business rates

One encouraging announcement is the increase in the Employment Allowance, doubling from £5,000 to £10,500, which offers much-needed National Insurance relief to employers. This change may offset some costs and enable businesses to plan more confidently.

Additionally, the announcement of business rates reform for retail, hospitality, and leisure businesses provides a cushion to these sectors. Replacing the 75% relief with a 40% cap through 2025 (up to £110,000) is a move in the right direction, though it doesn’t fully relieve the pressure on these critical industries.

Business owners need clarity and consistency from the government to plan and thrive. This incremental relief on business rates is appreciated but doesn't fully address the systemic issues businesses face within these industries, particularly in city centres where rents are high and foot traffic is still rebuilding. Businesses in retail and hospitality, for instance, could benefit from a more comprehensive business rates overhaul that aligns with current market realities and inflationary trends.

Corporate Tax Roadmap and Fuel Duty Freeze

The government’s commitment to capping Corporation Tax at 25% offers a level of certainty that businesses can rely on. This stable tax environment may be beneficial for larger firms, but small businesses often need more flexible, tailored reliefs to address their unique challenges.

The freeze on fuel duty is another positive note, especially for small businesses with transportation costs. Yet, while freezing duties may be a short-term win, long-term transport costs, driven by inflation and environmental taxes, will remain an issue. Many businesses would benefit from additional support for transitioning to electric vehicles and energy-efficient solutions, particularly as costs continue to climb.

Preparing for an uncertain future

The Autumn Budget has set the stage for a challenging few years ahead for the UK’s small businesses. While some measures may provide relief, such as the Employment Allowance increase and business rates adjustments, the budget overall places a substantial financial burden on small businesses.

Without proactive planning, many may find it challenging to absorb these costs. We are working closely with small businesses across the UK to navigate these challenges. To foster sustainable growth, we encourage the government to consider further targeted support for small businesses. Specific measures could include additional R&D credits for small businesses, extended reliefs for eco-friendly transitions, and a streamlined tax environment that reduces the administrative burden.

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