Autumn Budget – what could it mean for small businesses?

Chancellor Rachel Reeves will deliver the new Labour government’s first Budget to parliament on 30 October. It’s set to be a difficult one, with “painful” decisions apparently needed to plug a £22 billion “black hole” in public finances. 

However the government has committed to boosting growth by supporting businesses, and said it won’t raise taxes on working people. 

So what can small businesses expect from this Labour government’s first Budget? Much of this information is speculative, but we’ve gathered some of the rumours and predictions:

• no changes to mainstream taxes 
• more clarity on the business tax roadmap
• capital gains tax changes expected 
• could dividend tax be on the rise?
• what’s next for fuel duty?
• other government announcements to watch out for

No changes to mainstream taxes 

Labour intends to tackle the public finance burden without raising taxes on working people, if their manifesto is anything to go by. They promised not to raise the basic, higher, or additional rates of income tax, National Insurance and VAT, so we’re very unlikely to see these change in Rachel Reeves’ budget. 

However, the government could choose to raise extra revenue from these taxes indirectly. Take income tax thresholds, for example. While they’ve pledged not to raise income tax rates, extending the current freeze on income tax thresholds (currently in place until 2028) could mean more people are paying tax or paying tax at a higher rate. 

More clarity on the business tax roadmap 

Labour has introduced the idea of a business tax roadmap, and we may get more clarification on this in the Budget. The roadmap is supposed to be published within six months of the election. 

We already know that the government plans to cap Corporation Tax at 25 per cent for the rest of this parliament. Reeves has also said Labour would “act” if “competitiveness is under threat”, possibly meaning this high rate could be lowered in future. 

Labour has also said they will continue the Conservatives’ full expensing policy for some kinds of asset investments. This means businesses will still be able to offset the full cost of qualifying plant and machinery investments against taxable profits. 

We may also hear more about plans to replace business rates at some point, with something else that “levels the playing field between the high street and online giants”. 

Capital gains tax changes expected 

Tax experts believe that Labour are quite likely to increase capital gains tax (CGT) in the Autumn Budget. 

The government has so far confirmed that PPR (principal private residence) will remain intact, and they won’t introduce CGT on any gains made from selling primary residences. However, they could increase the rate of CGT in line with income tax rates. 

Labour could also choose to reduce the annual tax-free allowance for CGT, or abolish it completely. 

Small businesses should watch out for moves related to capital gains tax because of business asset disposal relief (BADR). Selling business assets is one of the biggest triggers of CGT. Currently, BADR allows some taxpayers a 10 per cent CGT rate on the sale of certain business assets. This costs the government around £1.5 billion annually, so could be reduced or removed completely. 

Could dividend tax be on the rise?

Business owners with limited companies paying themselves through dividends will want to watch Labour’s moves in this area. Dividend tax is currently taxed at a slightly lower rate than income tax, so raising it could increase government funding. Matching it with income tax would also help Labour reach their goal of simplifying the personal tax system.

What’s next for fuel duty?

Fuel duty has been frozen since 2011-12, but Sir Keir Starmer refused to rule out raising it in the run up to the election. The previous government kept fuel duty frozen (with a 5p cut) for the 14th year in a row, so this would be a major change. 

Any increase would definitely impact small business owners who rely on their vehicle for work, raising their costs further. 

Other government announcements to watch out for

Labour’s manifesto referenced a number of schemes that, alongside the new ones discussed in the Budget, are set to raise £8.5 billion by 2028-29. These are less relevant for small businesses, but worth being aware of: 

• an extension to the Energy Profits Levy 
• changes to the taxation of carried interest
• launching VAT on private school fees and removing charitable Business Rates relief for private schools 
• replacing the non-domicile tax regime

What are you expecting to see in the Autumn Budget, and how do you think this will impact your business? Let us know in the comments. 

More finance news and guides for small businesses: 

• What does a Labour government mean for small businesses?
• Business tax: A guide for small businesses
• How to do a Self Assessment tax return – the complete guide
• What is business insurance?

Photograph: Nigel/stock.adobe.com