This week Philip Hammond has delivered his first budget as chancellor and like so many people, I’m disappointed that small businesses and the self-employed have been hit by large tax rises.
As I mentioned a few weeks ago in this blog post, Britain is a nation of entrepreneurs with many more yearning to start a business. Self-employment has grown a whooping 40% since and 2000 and it looks like this number was set to reach a record 5 million by the end of the decade.
In reality, the new changes, depending on how much you earn, might not make a dramatic difference to what is in your pocket but every bit counts. What is more damaging is that they set a prevailing wind and sense amongst new entrepreneurs and those who yearn to be entrepreneurs that the government is not supporting business owners. Starting and running your own business feels like a giant leap and if you feel that you will be without support and tides may turn against you then that could be enough to put you off altogether and send you straight back to the corporate world or a 9 – 5.
What worries me is that the changes could prevent new businesses being formed as many people will have second thoughts about tapping into their entrepreneurial spirit. The chancellor shouldn’t forget that growth in self-employment has driven our labour market in recent years and these changes are sure to put small businesses at risk.
So what are the main changes that will affect SMEs?
Firstly the chancellor had announced a large increases to the national insurance contributions (NICS) paid by the self-employed and small business owners. Class 4 NICS for the self-employed will rise next year from 9% to 10% and further increases are expected in 2019.
Also there was reductions in tax allowances on dividends for company shareholders from £5,000 down to £2,000 which represents another dent to the incomes of many business owners.
Everyday I see first-hand how tough life is for many small businesses in the UK, and I also see how many people are so close to making their dreams a reality but a lack of finance stands in the way. As their incomes and wealth are chipped away at, people will have to be mentally stronger than ever to take the leap of faith.
What do you think about the recent budget announcements? I would love to hear your thoughts – tweet me @thematthaycox.