Home Business News Small businesses desperate for tax help at Spring Budget as insolvencies hit record high

Small businesses desperate for tax help at Spring Budget as insolvencies hit record high

by Amy Johnson LLB Finance Reporter
20th Feb 24 1:41 pm

The UK’s struggling SME sector is eager for tax incentives or relief at next month’s Spring Budget, a survey from employment management platform Employment Hero has revealed.

Chancellor Jeremy Hunt will deliver the Spring Budget on March 6, with small firms up and down the country eagerly watching for potential help.

Asked what type of additional support they would like from the Government, the survey of 540 UK SME leaders found that 45% would like tax incentives and relief measures.

35% would like increased funding for skills and workforce development and 24% would like support for technological adoption and digitalisation.

These smaller businesses need the help. A quarter of firms (25%) said their business was not yet back to its pre-pandemic health.

A majority (55%) cited “rising costs/inflation” as one of their top three challenges in 2024, followed by cash flow (34%) and employee retention (28%).

The Autumn Statement included some incentives for small businesses, including full expensing and an extension of business rate relief.

But small businesses still face serious challenges, with the highest number of insolvencies since records began in 1960 seen in the final quarter of 2024 – 25,158, a 9% increase on the year prior.

Employment Hero UK MD Kevin Fitzgerald said, “SMEs are not just the backbone of the UK economy, they’re the lifeblood – driving innovation, employment, and regional development. However, the post-pandemic landscape, compounded by unprecedented inflation and rising costs, has placed immense pressure on these businesses.

“Employment Hero’s report highlights the urgent call from SME leaders for meaningful government intervention. 45% of respondents are pleading for tax incentives and relief, underscoring the critical need for immediate action to alleviate their financial burdens.

“Chancellor Jeremy Hunt’s prior initiatives offered a glimmer of hope, yet the persistent challenges and the spike in insolvencies signal the need for more robust, targeted measures.

“Elevating the VAT threshold to £100,000 would not only adjust for inflationary pressures but also provide emerging businesses the breathing space essential for stabilisation and growth. Similarly, revising the rates relief threshold would directly benefit a wider range of SMEs struggling to navigate the tumultuous economic waters.

“Moreover, reintroducing tax-free shopping for tourists could serve as a double-edged sword, bolstering tourism while providing a financial reprieve for businesses grappling with high operational costs. This policy alone showcases the innovative approaches the government can adopt to support the SME sector without straining the Exchequer.

“However, while we advocate for decisive governmental action, we also recognise the imperative for SMEs to adapt proactively. The transition towards more efficient operational models, leveraging AI for administrative efficiency, and prioritising employee retention through enhanced productivity, are critical steps SMEs must take to navigate the challenges of 2024 and beyond.

“At Employment Hero, with over 300,000 SMEs in our global employment ecosystem, we witness daily the resilience and innovation inherent within these businesses. It’s time for a concerted effort from both the government and the private sector to ensure these enterprises not only survive, but thrive in the face of adversity.”

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