Hit for business owners as dividends hit, which will hurt entrepreneurs who pay themselves this way
Help: Jenny Clark Founded The Wild Times
Chancellor Jeremy Hunt was a businessman, as he noted in his budget statement three days ago. But not all of the measures he announced have been welcomed by small businesses.
The support measures include £13.6bn in tax cuts over the next five years and a government-funded “transition relief scheme”, which Hunt said would benefit around 700,000 businesses and mitigate the impact of the tax increase. companies next year.
However, there were cuts in the research and development (R&D) tax break, as well as a cut in the dividend allocation that will hurt entrepreneurs who pay themselves this way.
Small business owner Jennifer Brown, 44, welcomed the news that the VAT registration threshold will be frozen at £85,000, meaning she won’t be required to pay more. She also welcomed the increase in the Employment Allowance, which allows small businesses to reduce their National Insurance contributions by up to £5,000.
However, the biggest impact on his firm, Pampeano, which sells handmade Argentine leather goods, is the impact of the budget on the value of the pound. She says: ‘I import everything from Argentina, so my biggest challenge is the exchange rates between the US dollar and the British pound. Kwasi Kwarteng’s October mini-budget plunged the pound and cut my gains. I’m so pleased that we now have people at the top of government who are financially savvy and maybe they can get us out of the hole we’re sitting in.’
Erin Moroney, owner of the health snack firm Nibble, is relieved that the research and development tax credit was not eliminated, but disappointed that it has been reduced. She says: ‘That tax incentive really encouraged companies to do more research and development.
‘So it’s going to hold back the creation of more innovative products. For companies like ours, who develop new products all the time, being able to claim your money back was really helpful. There’s a lot of trial and error with food science, so it’s challenging to create new products.’
Jenny Clark, 30, is a yoga teacher, paddleboard instructor and founder of The Wild Times, which runs nature-focused retreats across the UK.
Since Jenny is already seeing business sales slow down, she was hoping for more help with the cost of living crisis. “She makes me question if I can keep doing what I do,” she says. “Starting a business is difficult at the best of times and I don’t think the chancellor has control over inflation.”
Business owners who pay themselves in dividends will be worse off, with the annual tax-free dividend allowance reduced from £2,000 to £1,000 next April, and then to £500 in 2024.
Michelle Ovens, founder of campaign group Small Business Britain, says: ‘We welcome the announcements about business rates, particularly the increase in rates available to the retail and hotel sectors. It will provide support to sectors that are on the front lines of reducing consumer spending.’