The Next Election – What Could it Mean for Small Business Tax and Funding?

The rumble of an upcoming general election is something every UK citizen feels, but for small business owners, the stakes are even higher. The future direction of the nation’s economy and the policies that will shape the business landscape hang in the balance. Let’s peel back the layers of political speak, polls, and possibilities to understand what’s on the horizon.

When Might We Vote Next?

Every few years, the political atmosphere in the UK charges up as we anticipate a general election. The last significant electoral showdown was on 12 December 2019. Fast forward, and the upcoming general election is slated for no later than January 2025, based on the rules that dictate an election must be held 25 working days after the government is dissolved on 17 December 2024.

However, like unpredictable UK weather, general elections can sometimes come as a surprise. Just look back at 2017 when former Prime Minister Theresa May called a snap election two years ahead of schedule. As of now, whispers in the political corridors suggest spring and autumn of 2024 as potential dates for the next showdown. Some senior Conservative MPs believe that spring 2024 could be an “economic sweet spot,” hoping that the challenges of inflation and the cost of living would have subdued by then. On the other hand, Prime Minister Rishi Sunak reportedly leans towards November 2024, seeking maximum recovery time for the economy.

The Current Political Landscape

If you’re curious about which way the wind is blowing, YouGov’s polls provide some insights:

  • Conservatives: 24%
  • Labour: 44%
  • Liberal Democrats: 9%

While polls don’t have a crystal ball, they paint a picture of the current mood. Given the numbers, the battle between Conservatives and Labour seems inevitable. But what could their victory mean for the small businesses of the UK?

Conservatives: The Current Approach and Future Implications

With the Conservatives in power, their recent decisions provide hints about the future. Their Spring Budget introduced some noteworthy changes:

  1. The income tax threshold reduced from £150,000 to £125,140, taxing earnings above this at 45%.
  2. The personal allowance of £12,570 has been frozen until 2028.
  3. Tax-free dividends have been slashed from £2,000 to £1,000, with further reductions planned for 2025.
  4. The tax-free allowance for capital gains tax saw a significant decrease from £12,300 to £6,000.

These decisions suggest a limited possibility of substantial tax relief for businesses if the Conservatives retain power. However, the party is banking on investment as their support pillar for businesses. One of the crown jewels of their strategy is the “investment zones.” Local leaders will have the reigns to stimulate business growth in eight key locations across England, each equipped with £80m to bolster skills, infrastructure, and business rates.

Furthermore, they’re promoting tax-free childcare for business owners and the self-employed. The aim? Helping business owners balance their entrepreneurial journey with family life. Lastly, with an ambitious goal to transform the UK into a global tech hub, they’re planning to funnel £75 billion into tech startups, tapping into major pension funds to support this vision.

Labour’s Vision for Small Businesses

Labour’s motto, “Making Britain the best place to start and grow a business,” is promising, but the actual details remain under wraps. Here’s a sneak peek into their strategy based on their recent announcements:

  1. Tackling the Late Payment Crisis: With a jaw-dropping £32.1 billion owed to small businesses in late payments, Labour is gearing up to introduce stringent laws to combat this issue. They’re proposing that large businesses disclose their payment practices in annual reports, keeping them accountable.
  2. Business Rate Revisions: Labour is considering cutting business rates for SMEs. The plan? Taxing the digital tech giants more to subsidise these reductions, potentially saving the average pub or restaurant a handsome £2,600.
  3. Sustainable Business Operations: With the energy crisis biting into the pockets of SMEs, Labour aims to make businesses more energy efficient. They’re exploring a voucher scheme for businesses to adopt eco-friendly solutions like electric vehicles or insulation. This scheme would be funded by taxing oil and gas companies.

In conclusion, the upcoming general election, be it in spring, autumn, or later, will have significant implications for the UK’s business environment. Whether you lean left, right, or centre, it’s vital to understand the potential outcomes and navigate the future with informed decisions. So, while we await the final manifestos, keep an ear to the ground, and a keen eye on the evolving political landscape.