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Business Owners Criticise Tax Hikes, Urge Chancellor Not to Hinder Growth

November 22, 2024

The ongoing surge in e-commerce has reshaped retail dynamics, necessitating a profound focus on meeting customer demands and surpassing expectations in fulfillment and shipping.

Entrepreneurs and family business owners are voicing strong concerns over recent tax increases announced in the Budget, warning the government not to undermine their passion for growth.

The criticism centers on measures that they believe will significantly impact their businesses, including increased employer National Insurance contributions, changes to inheritance tax on family-owned assets, and reduced capital gains tax reliefs.

Craig Bunting, co-founder of Bear Coffee, which employs 130 people across eight cafés in the Midlands, stated that the Budget measures would have a “massive impact” on his £5.5 million turnover business. He estimates an additional £200,000 per year in costs due to the rise in employer National Insurance contributions from 13.8% to 15% starting next April. The threshold at which employers begin paying this tax will also be lowered from £9,100 to £5,000, affecting more part-time workers.

Bunting expressed frustration, saying, “I don’t want to be taken advantage of just because I am passionate enough to want to create something that has purpose, employing people and creating good jobs.” He emphasized that the unexpected changes, particularly the inclusion of lower-paid and part-time employees in National Insurance contributions, were a “sly change” that could impact customer prices and deter new business ventures.

Farmers have also protested in Westminster against making family farms liable for inheritance tax from April 2026. For decades, agricultural and business property have been exempt to facilitate long-term ownership. Family business owners like Stuart Paver, chairman of York-based shoe retailer Pavers, echoed these concerns. He argued that the imposition of inheritance tax on family firms contradicts the government’s policy of encouraging long-term investment and economic growth.

Paver illustrated the potential financial strain on a family business making £1 million in profit, highlighting how inheritance tax obligations could consume dividends meant for reinvestment and shareholder returns over many years. “It makes it not sensible to hold the shares and pass them on,” he said, suggesting that this could lead to more sales to private equity firms with shorter-term objectives.

Nicky Walker, managing director of Walker’s Shortbread, took a more measured view but acknowledged that the Budget has led to reassessing their three-year investment plan. “While there was noise when the government got in that they wouldn’t increase taxes, you always think it is going to happen. How else does a government raise money?” he remarked.

Walker noted that although the tax rises come after challenging years for businesses, the certainty allows for better planning. However, he admitted that the measures could affect future investments and shareholder dividends, potentially leading to difficult conversations within family-run companies.

The National Living Wage is also set to rise by 6.7% to £12.21 next April, adding to the financial pressures on businesses. Entrepreneurs are urging the government to reconsider these measures, warning that they could stifle growth, discourage investment, and negatively impact employment.