- Business
The UK’s small businesses were a key focus in Chancellor John Healey's first Budget, with the announcement of a package of business rates relief, entrepreneur incentives and tax reforms.
While Healey had little legroom for large giveaways, he made it clear he was focused on supporting smaller firms where possible. With the ongoing conflict in the Middle East seeing higher running costs and more expensive business loans, his efforts will likely be well-received by the business community.
Hetal Mehta, SJP’s Chief Economist, said: “We welcome this era of less fiscal speculation and hope it continues so that businesses have more certainty and confidence to invest.”
At a glance
- Small business rates relief (SBRR) is expanding, with a higher threshold for 100% relief and additional support for pubs, clubs and many live music venues from April 2027.
- Entrepreneurs and founders to receive new initiatives, including a higher trading allowance of £3,000, new young entrepreneurs allowance, support for female founders and a 10% CGT rate on qualifying gains.
- Business owners will face stricter but simpler tax rules, with changes to VAT obligations, capital allowances and business asset disposal relief (BADR).
Continued support for the high street
Healey confirmed plans to increase the threshold for 100% small business rates relief (SBRR) for retail, hospitality and leisure from £12,000 to £18,000.
This means from April 2027, roughly 70,000 businesses in these sectors – such as shops, restaurants and gyms – will not pay any business rates at all. These tax breaks will not apply to adult gaming centres and vape shops.
The tapered relief band will also increase, from £15,000 to £21,000 for qualifying businesses from April 2027.
All other qualifying businesses in retail, hospitality and leisure will see their business rates frozen in real terms for the next two years – meaning not rising at the same rate of inflation, as had been previously announced.
In addition, pubs, social clubs and all but the largest live music venues in England will receive an extra 20% business rates relief from April 2027. Combined with the 15% relief announced earlier this year, this brings total support to 35%.
Keen to offer a fully funded spending plan, Healey said he would pay for this high street support package by raising taxes on gambling.
Games duty on higher-stakes machines will be increased from 20% to 25%. This tax increase will not apply to pubs and seaside arcades.
Elsewhere, Healey announced £10 million in alcohol duty relief, which should benefit around 2,000 small British brewers and cider producers.
In a bid to help level the playing field between online and bricks-and-mortar retailers, Healey is tightening the VAT rules.
From October 2027, online marketplaces will be responsible for collecting VAT on behalf of their UK-based sellers. This rule will apply where more than £90,000 of sales are transacted on their platform. Personal online sellers will not be affected.
Incentivising British innovators
Meanwhile on enterprise, Healey said too often Britain’s entrepreneurs take the fruits of their labour overseas.
To incentivise founders of high-growth businesses to remain in the UK, Healey announced a series of measures:
- Tripling the trading allowance – the amount you can earn from a new venture without paying tax – from £1,000 to £3,000.
- Introducing a new young entrepreneurs allowance – which will support living costs for young founders while they get their ideas off the ground.
- Introducing a new £200 million scaleup programme to support female founders.
- Reforming skilled worker visas and non-compete clauses in contracts, allowing founders of one successful company to more easily move on and set up another.
- Introducing a new founders’ relief from April 2027 – a lower 10% CGT rate on up to £10 million of lifetime gains.
Modernised tax rules for business owners
Business owners and entrepreneurs can look forward to a tougher, yet simpler tax regime.
Healey announced additional HMRC funding to improve compliance and help it collect overdue tax debts.
Businesses submitting self-assessment tax returns will be able to pay in smaller, more regular payments from 2029.
Healey also announced moves to align the taxation of company profits and close perceived loopholes.
Other measures affecting business owners include:
- Reducing the lifetime limit for business asset disposal relief – formerly known as entrepreneurs’ relief – from £1 million to £500,000. This will potentially increase the tax bill when selling shares in, or an entire, qualifying business.
- More generous first-year relief on certain new investments, increasing the main first-year allowance from 40% to 50%.
- Reducing the main writing-down allowance rate from 14% to 12%, meaning businesses will get slightly less tax relief on the remaining value of qualifying assets over time.
- Full expenses will be maintained around corporation tax on eligible assets.
The Budget has brought a plethora of small changes for business owners of all shapes and sizes – from the high street to tech entrepreneurs. If any of these rule changes are likely to affect you, or if your circumstances may change, please get in touch with your financial adviser.
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