Rishi Sunak’s first Budget yesterday brought many changes that will affect small businesses across the UK. Part of the three-point plan to tackle the impact of coronavirus focussed on new support for affected SMEs, which includes the promise of a full refund for up to 14 day’s worth of sick pay per employee; the creation of a Coronavirus Business Interruption Loan Scheme and the announcement that business rates will be abolished altogether for smaller firms in retail, leisure and hospitality.
In line with many rumours, Sunak also confirmed that the Government will be maintaining tax breaks in the form of Entrepreneurs’ Relief, however with significant reduction – a “sensible reform” in the words of Sunak. Currently, entrepreneurs are granted relief on up to £10 million, but today’s Budget sees this reduced to £1 million. The Chancellor promised that this reduction would not affect 80% of SMEs in the UK. Cutting the allowance will almost certainly affect founders’ decision making when it comes decide their salary or taking money out of the business instead of investing in growth – which ultimately decides the value of the company at exit.
Sunak also touched on the Government’s promise to “level-up” the regions of the UK outside of London. Extra funding of over £1 billion for Northern Ireland, Scotland and Wales was revealed, as well as new HM Treasury offices in the latter two locations and a civil service hub in the North of England that is due to hire 750 staff members. Universities outside of the South East have also been committed an extra £400 million for Research and Development Funding.
The proposed new investment in these areas from the Government will undoubtedly impact the UK economy in a highly significant way, however much of the support for small firms will continue to come from private investors. SMEs already contribute 52% of the turnover in the UK’s private sector, and expanding investment across the whole of the nation will unlock the growth of the economy exponentially. IW Capital recognise this potential, and are always looking to support, strengthen and empower the eco-system of entrepreneurs that exists in the UK. With the benefit of Entrepreneurs’ Relief diminished, too, it is more important than ever for other tax relief schemes – such as EIS – to be promoted into the spotlight in order to encourage and incentivise investors to empower the SME arena.
This article originally appeared on IW Capital.