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Rachel Reeves warned against ‘anti-enterprise tax rises’ in upcoming budget

October 8, 2024

Chancellor Rachel Reeves has reinforced the government's stance on urging the UK’s financial regulators to actively promote the growth and competitiveness of the City of London.

Rachel Reeves has been urged by Britain’s largest employers’ group to avoid implementing “anti-enterprise tax rises” in this month’s budget, as concerns grow over the potential impact on entrepreneurs and small businesses.

The Federation of Small Businesses (FSB) has cautioned that raising taxes on capital gains and other business-related levies could harm the UK’s economic growth and discourage entrepreneurship.

As the chancellor seeks to balance the public finances, reports have suggested she may consider increasing capital gains tax (CGT), which is currently charged at lower rates than income tax. However, business leaders warn that such a move could stifle the incentive for individuals to start and grow companies. Currently, entrepreneurs benefit from a CGT relief that allows them to pay just 10% on gains up to £1 million, compared to the standard 20% rate. The FSB has called on Reeves to maintain this relief, arguing that without these incentives, the risks taken by small business owners would be poorly rewarded.

Tina McKenzie, policy chairwoman of the FSB, said: “The chancellor, in her recent party conference address, gave every impression that she would sensibly avoid being lured into damaging anti-enterprise tax rises in the budget, and we urge her to stick to that.”

The FSB’s pre-budget submission also outlines several recommendations for easing employment costs. These include reintroducing a rebate that allows small businesses to reclaim the costs of statutory sick pay and increasing the employment allowance, which reduces national insurance contributions for small employers. Additionally, the FSB has called for reforms to protect small companies from business rates and for action to stop lenders from demanding “personal guarantees,” which can force business owners to risk their homes when borrowing money.

Meanwhile, the Confederation of British Industry (CBI) has urged the chancellor to deliver a “tone-setting” budget that demonstrates the UK has a credible plan for boosting growth. In its submission, the CBI advocates for reforms to the apprenticeship levy and calls for non-taxable health support to help businesses invest in their workforce, reducing economic inactivity due to ill health. The CBI also recommends the introduction of a “business tax roadmap” to provide long-term fiscal clarity, which would help businesses plan and invest effectively.