7 Ways the Budget Will Affect SMEs | Blog | Foundation East

7 Ways the Budget Will Affect SMEs

Post budget analysis is prolific. Many of our clients, wanting to cut to the chase, have been asking our advisors how it’s going to affect them. Here’s our analysis on what the budget means for SMEs across the UK (especially within the Eastern region) …

1. The budget will help some SMEs to meet hikes in business rates ...


Let’s start with some good news! The budget will help some SMEs to meet increases in business rates. Here’s how:


  • The budget makes available a £300 million discretionary relief fund to help local authorities assist the SMEs in their area worst affected by business rate increases;
  • Those set to lose small business rate relief will be helped by the cap of £50 per month on any increase;
  • Smaller, independent pubs will benefit from the proposed £1,000 reduction to their rates bill this year.

Good news, yes, though as Mike Cherry, National Chairman of the Federation of Small Businesses (FSB) points out: “For those businesses most in need, it is a very welcome short-term measure – but there is concern that the fund may not be big enough. Many small firms are already receiving their bills and so it is vital that Government and local councils communicate immediately with their local business population to explain how this fund will work.”

2. The budget’s hike in National Insurance for the self-employed may hinder growth of new businesses …

The increase in National Insurance for the self-employed has been critiqued widely as a tax grab on the ‘just about managing’ and a break in this government’s manifesto promise.

It means 1.6 million self-employed people will be paying £240 average more every year. This will include plumbers, electricians, builders, hairdressers, designers, musicians and many others who are contributing positively to local economies and communities, without benefitting from the privileged access that the employed have to financial products such as income protection, loans and mortgages.

Some are justifying the hike by pointing out that it is only the self-employed with profits over £16,250 who will have to pay more as a result of these changes - at an average cost of 60p a week to those affected. I shall refrain from making a value judgment on this, I cannot, however, withhold expressing disappointment that the role of the self-employed in boosting the UK economy has been neither recognised nor rewarded.

Indeed, as Chris Bryce, chief executive of IPSE (the body that represents the self employed) said: "The chancellor should not forget that growth in self-employment has driven our labour market in recent years and punitive rises in tax will make many people have second thoughts about striking out on their own."

3. The budget’s postponement of implementing mandatory quarterly digital tax reporting?buys SMEs time …

In a previous blog I clarified the situation regarding mandatory quarterly tax reporting and am delighted that the budget confirmed that its implementation for the smallest businesses (those with a turnover of less than £83,000) is to be delayed.

It is good to know too that the FSB continues to lobby, advising: "HMRC should now use this time to conduct more user-testing, develop more appropriate software solutions and prepare the business community for relevant changes.”

The FSB also points out in its reaction to the budget that the government has left the annual turnover exemption threshold unchanged at £10,000, which will largely only benefit part-time and hobby businesses, advising: “ We will use this window of opportunity for a final attempt to convince HM Treasury that a higher threshold is necessary to make sure the system works.”

4. The budget’s change in dividend taxation allowance stifles entrepreneurship?…?

The budget announced a drop in tax-free dividend allowance from £5000 to £2000 starting in April 2018 – a move that is seem by many as a tax on entrepreneurship.

Indeed, many entrepreneurs will see a significant rise in their tax liabilities as a result and the uncertainty that this causes seems counter intuitive to the Government’s pledge to create stable and certain tax environment for small firms.

5. The budget helps to close the skills gap??…

It’s hard to avoid media coverage of the skills gap (the difference between the skills that employers want, as shown by their job advertisements, and those that are available from workers looking for a job). It’s certainly an issue applicants for Foundation East loans bring up time and time again.

So, it’s good to see a rise in funding and recognition of vocational training (the budget commits to spending up to £40 million by 2018-19 testing different approaches to help people to retrain throughout their working lives and to increase spending on technical levels by £500 million per year). We’ll report further as more information becomes available on initiatives to help SMEs close the skills gap. In the meantime here’s a great article about how T-Levels aim to improve UK productivity.


6. The budget’s proposed investment in digital infrastructure helps to create a level playing field?…

A new vouchers programme (worth £200 million) to provide full fibre broadband connections to businesses was also announced. With many rural areas in East of England being held back by lack of such infrastructures, we look forward to learning and reporting back on how it will be allocated.


7. The budget’s proposed investment in transport infrastructure? further levels the field …

An allocation of £690 million to ease congestion on local road networks was confirmed. This comes from the funding set aside in Autumn Statement 2016. Local authorities will now be able to bid for this so that they can deliver crucial improvements to local road networks. Foundation East provides business support, including loans, to SMEs across the East of England and will, of course, report back as the corresponding authorities and associated influencing bodies’ next steps are known.

  • About the Author
    Katy Ford

    Katy Ford

    Katy’s knowledge of community finance is extensive, having worked for Foundation East since its inception in 2004. She is recognised locally as an influential business leader by the Suffolk 100 and nationally, as a founding member of AskIf, an online network of community-based lenders. Previous to moving across to community finance, Katy was the treasury manager for a large insurance company. She also has experience as a SME owner, having run a small hotel.

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