Potential Tax Changes to Prepare For

The Chancellor has a difficult job on her hands, balancing the need to fill a fiscal “black hole” with manifesto promises not to raise certain taxes. This has led to widespread speculation about where the revenue will come from, with many analysts pointing towards indirect taxes, business rates, and taxes on wealth.

Business Rates

The government has confirmed that further announcements on the reform of business rates are coming. While the small business rates multiplier is expected to be frozen, the standard multiplier is likely to have increased, impacting many businesses not covered by specific reliefs. A long-term overhaul of the system is promised, with a new structure potentially from 2026. This might include a new “duty to notify,” requiring businesses to provide property information in real-time, so it’s wise to prepare for greater administrative burdens.

Pension Tax Relief

There has been considerable speculation that the government may seek to reduce the tax advantages of pensions for higher earners. Proposals include standardising pension tax relief at a flat 20% rate for everyone, or lowering the tax-free lump sum that can be taken from a pension. While these proposals are aimed at individuals, they could have a significant impact on business owners’ long-term retirement planning.

Capital Gains Tax and Inheritance Tax

Rumours persist that the Chancellor will target capital gains and inheritance. For business owners, this could mean an increase in the rate of CGT, making it more expensive to sell a business or other assets. There could also be changes to reliefs like Business Asset Disposal Relief (BADR). Any changes to inheritance tax, such as a lifetime gifting limit or further restrictions on business property relief, could also have a major impact on succession planning for family-run businesses across Worcestershire.

VAT and Other Levies

One of the most talked-about changes is the possibility of lowering the VAT threshold. This would bring thousands of smaller businesses into the VAT system for the first time, increasing their administrative burden and potentially their costs. While no one expects a rise in the headline VAT rate, watch for changes in which goods and services are exempt or zero-rated, as this could have a knock-on effect on prices and consumer spending.

Actionable Advice for Worcester Businesses

Preparing your business for the Autumn Budget isn’t about panicking; it’s about being proactive. Here are my recommendations:

1. Model the Scenarios: Use the coming weeks to work with your accountant to model different tax scenarios. What would a change in Corporation Tax, a rise in employer National Insurance, or a new tax on dividends mean for your cash flow and profitability?
2. Review Your Financial Structure: Consider whether your current business structure is still the most tax-efficient. Now might be a good time to review your dividend strategy or a potential restructuring of your assets.
3. Utilise Available Grants and Support: Even if the Budget doesn’t announce major new grants, there is a wealth of support already available for local businesses. The Worcestershire Growth Hub is an excellent resource, and I encourage all local SMEs to explore what’s on offer.
   • Elevate Worcestershire Grants: These are specifically designed for established SMEs looking to grow, with matched-funded grants from £1,000 to £10,000 available for projects like machinery, marketing, and consultancy support.
   • Business Energy Advice Service (BEAS) Grant: With energy prices still a concern, this grant can help businesses in Worcester to reduce costs by funding energy-efficient measures like lighting and insulation.
   • Worcester City Council Grants: The city council has a programme of grants for both start-ups and growing businesses. Be aware that some of this funding is limited, so it’s worth contacting them to register your interest.