With a landslide result for Labour, we have a new party in charge now, after 14 years of the Tories. And however you feel about them, a change in government will surely mean changes for your business.
Rising costs and inflation, increased taxes and regulation, and reduced consumer spending have defined the last few years for small business owners. Now, with new people in charge, things are likely to move quickly. So what’s been promised in their manifesto, what’s been rumoured, and how can you prepare?
Here’s what a Labour government could really mean.
Will SMEs pay more tax under Labour?
Keir Starmer’s party has stated there are no plans to increase taxes on working people; that is National Insurance contributions, as well as basic, higher, or additional rates of income tax and VAT.
Labour do plan, however, to cap corporation tax at 25%. This could help support small business growth, as you’ll be able to deduct capital investments. But any direct benefit of this cap will depend on your profits and what kind of business you run.
When it comes to VAT, it’s a bit of a guessing game right now. Previously, Conservative Chancellor Jeremy Hunt increased the threshold from £85,000 to £95,000. The higher the threshold, the more money you can make in your business before you need to pay VAT. This was welcome news for many small businesses that were close to the line. Let’s wait and see what Labour has in store.
Skills shortage and workers rights
It’s no secret that the skills gap is having a huge impact on local traders. Labour plan to solve this by providing more training opportunities and replacing the current Apprenticeship Levy with a ‘Growth and Skills Levy’.
The party hopes this will allow small businesses greater flexibility in how you train your workforce and access a more skilled labour pool. What’s more, Labour wants to turn educational colleges into ‘technical excellence colleges’, to align vocational training courses with business needs.
And what about for workers? Well, the National Living Wage will continue to rise, with the Low Pay Commission considering the cost of living in its recommendations. Labour also intends to ban zero-hours contracts and fire-and-rehire practices, which should create a more stable workforce for SMEs!
Combating late payments
Late payments are a chronic issue for SMEs, and Labour plans to introduce tough laws to address this. They propose that large companies report their payment practices in annual reports to enhance accountability, ensuring timely payments for small businesses and the self-employed. This initiative reflects the sentiments of 39% of small business owners who seek more government support and guidance on late payments.
Read more about avoiding late payments here.
High street banking promised
Bank branch closures have been a hot topic in recent years, with over 4,600 local branches leaving the high street since 2020. In their manifesto, Labour has guaranteed small businesses access to banking services on the high street, including cash depositing. The party wants to change regulations so that banking hubs can be rolled out faster.
Business rates scrapped
In one of their biggest overhauls, Labour is planning to do away with the business rates system, in favour of something that levels the playing field between online giants and high street businesses.
Keir Starmer’s party says their plan will fill empty shops, encourage entrepreneurship, and incentivise investment for small businesses, while reducing your tax burden.
A new lease of life for construction
The construction industry has faced many challenges of late – material shortages and a lack of skilled workers. Labour’s plan to turn this around is to reduce the ‘red tape’ in the current building planning system, and build 1.5 million new homes, creating opportunities for small builders and tradespeople. The party also wants to strengthen planning capacity by hiring 300+ new planners across the public sector.
Making public contracts accessible
Labour calculates that billions are spent on buying public sector procurement each year and estimates that £30 billion could be ringfenced specifically for SMEs. In fact, the party wants to introduce a National Procurement Plan, which would give small businesses a fairer chance at winning public contracts.
In this scheme, at least one SME would be shortlisted per suitable contract. And to level the playing field, Labour once again wants to cut back on the red tape involved in the bidding process, to level the playing field for SME owners.
Will Labour’s changes be good for SMEs?
The transition to a Labour represents a massive shift, after over a decade of Tory governance. Keir Starmer’s party won on a ‘change’ manifesto, and now the proof is in the pudding: can they deliver on it? After all, in politics it’s one thing to make promises, and another to put your plans into action.
From what plans have been laid out, there are glimmers of hope for small business owners. However, the real impact will ultimately depend on how these policies are implemented, and if they can effectively address the persistent issues of rising costs, inflation, and reduced consumer spending.
Howden’s here to help!
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Pop by your nearest Howden Commercial branch to find out about the opportunities on offer. Plus, our expert advisors will be able to help you find the right commercial, liability or van insurance for your business.
Sources: FSB, The Labour Party, SME Today