Almost half of small businesses say Budget tax grab would have a negative impact

Small businesses will have to put up prices to cope with tax increases announced at the 2024 Autumn Budget, Enterprise Nation has warned.

With just one day to go before the chancellor delivers her maiden Budget speech, our survey found that almost half (47%) of small business bosses say a Capital Gains Tax (CGT) grab in the Autumn Budget would have a negative impact on day-to-day operational decisions.

Almost a quarter (23%) founders said technical changes to CGT including scrapping the Asset Disposal Relief would impact exit plans, 17% were worried it could impact future investment and one in 10 said it could impact the valuation of their business.

The research found that entrepreneurs were also concerned about the cost of implementing new worker rights legislation, despite 69% stating their staffing arrangements already met statutory requirements or above, half said new costly measures and enforcement would make them more cautious in hiring new staff. Day one unfair dismissal rights iwere a particular concern, with 63% saying it would impact hiring plans.

The looming threat of the 75% business rates relief in England not being extended from April, is adding to their woes, with 45% fearing increased costs as a result.

Emma Jones CBE, founder and CEO of Enterprise Nation, said:

"We know the chancellor is having to take difficult fiscal decisions to fill the reported £22bn 'black hole', but in order to handle some of the financial impacts that are coming down the line for small businesses, many are going to need extra support.

"Increased business costs associated with enhanced worker rights, for example could mean many will have no choice but to put up their prices to customers - or look to make efficiencies elsewhere. That could mean less investment in growth and less jobs.

"Small businesses are resilient in the face of adversity, but they will need help to rethink their strategy in order to cope with an increased tax burden.

"These changes coupled with increases in CGT or the removal of the Asset Disposal Relief could have unintended consequences and disproportionately impact female entrepreneurs and start-ups, causing them to rethink exit plans or just not start a business in the first place.

"There must be a plan to support these businesses in place to cope with these increased costs."

The community says female entrepreneurs often have to make personal sacrifices as they grow a business with a long-term view that they will be able to benefit further down the line.

"It's fair to expect to make money from the sale of your business"

Small business owner case study

Ethical skin care brand BYBI co-founders Elsie Rutterford and Dominika Minarovic have recently signed an investment deal that they hope will turbocharge their business, providing the infrastructure to ramp up activity and growth over the next 18 months to two years with a view to a sale and exit for the two founders.

The business partners started and grew BYBI Beauty from an industry insider blog about the sustainability of the beauty business seven years ago. Clean Beauty Insiders quickly became the UK's largest natural beauty platform, with growing Instagram and TikTok profiles.

The pair created and shared DIY beauty recipes, ran workshops and hosted events whilst still working full time in advertising and sales.

Frustrated by the lack of high-performance ingredients in their favourite products, they decided to develop and manufacture their own clean formulas that are sustainable, vegan and produced only using green energy, and have employed more than 50 people over that time in the business and in the warehouse. They now export globally.

Elsie said:

"We realised we had got to a stage in the business where there was an opportunity to scale up dramatically and to do that we needed the knowledge and financial resources of an investor.

"Nobody tells you that in order to expand in this way you must overhaul all of your systems and provide a new infrastructure that's going to power-up all of your processes. That's expensive and is why we've brought in a new majority shareholder who will help us with capital table restructuring."

With hints that the Autumn Budget could see Capital Gains Tax and Asset Disposal Relief targeted in a tax grab, the pair and their new investor could be faced with a smaller profit following the sale after tax.

Elsie said:

"It's fair to expect to make money from the sale of your business that reflects the years of sacrifice and hard work you put into it.

"Since we started the business both of us have become mothers and we've both had to give up so much to run and grow the business. That's in addition to the years we ploughed our own money into it and took a meagre salary, while self-funding the growth.

"We did this all in the spirit that there would at some point be an end game.

"Are there other ways the Government could pave the way for support founders to support the economy?

"If this does go ahead it will have an impact on the number of people starting businesses and that will have an impact on the economy."

Listen to Elsie Rutterford share her business story on the Enterprise Nation Small Business Sessions podcast.

Autumn Budget 2024 small business wishlist

In our Autum Budget 2024 wishlist, Enterprise Nation is calling on chancellor Rachel Reeves to prioritise digital adoption amongst the UK's small business community to boost growth and productivity.

The small business support platform and membership organisation says digitalisation underpins every single growth priority and we need a plan to rapidly increase digital adoption and skills among SMEs to achieve the government's pledge to maintain the highest rate of economic growth in the G7.

This includes offering targeted tax incentives and time-limited subsidies in tandem with training programmes designed to introduce small businesses to emerging technology like artificial intelligence.

Enterprise Nation is providing extensive coverage of Autumn Budget 2024, including a live webinar discussing what small businesses want from the speech, and a panel of founders and experts sharing instant reaction to the annoucements. Find out more.