Firms across the UK are bracing for a week of new cost increases and reporting requirements, with the Federation of Small Businesses calling on government to support those impacted and rule out the introduction of fresh burdens.
From today, HMRC is forcing VAT-registered businesses to comply with its Making Tax Digital initiative, which will involve software purchase which could cost more than £500.
It’s also the start of Year Three third year of the business rates revaluation period in England and Wales also starts today, meaning thousands of firms will lose transitional caps on rising bills.
Business rates are set to generate £25bn for local authorities in England this year. Leeds and Manchester are the only non-London authorities in list of authorities who’ll receive the most income from them – in Leeds it’s an estimated £378m.
Elsewhere – with the new personal tax year starting on Saturday – small business owners will be required to put more aside for employees saving into auto-enrolment pension schemes. The minimum total contribution to such schemes will rise to 8% of an employee’s qualifying earnings, up from 5% last year. Employers will be required to shoulder 3% of the contribution.
In addition to these changes, small businesses are also facing the latest rise in the National Living Wage from today, increasing from £7.83 for workers aged over 25 to £8.21. The National Minimum Wage will also increase from £7.38 to £7.70 for those aged 21-24. These rises also mean higher National Insurance employer contributions, pension contributions and impact on differentials.
FSB National Chairman Mike Cherry said: “This truly is blue Monday for small business owners, and it comes at a time when confidence is already in the doldrums – and according to the Government’s own figures, there are 27,000 fewer firms in the UK
“Given the burden that MTD has placed on small business owners, it’s vital that the Government makes good on its commitment to light-touch enforcement. The software required to comply with MTD alone is setting small firms back by hundreds of pounds – and that’s before you get to the time and resource needed to negotiate new software.
“Business rates is an unfair, regressive tax that hits small firms before they’ve made their first pound in turnover, let alone profit. The help won from government to support those hurt most by the 2017 revaluation is now falling away, leaving many small businesses with a 20% hike to their bills plus an inflation-linked increase.
“While we’ve fought hard for discounts this year, a huge amount of further reform is needed. For example, a firm with a rateable value below £12,000 qualifies for 100% relief – but a firm working from a premises with a £3,000 rateable value who then expands to another space with the same value? They’re hit with a 3,000% increase in their rates bill. It’s obscene.
“Though small business owners are absolutely committed to helping employees save, auto-enrolment has already cost them significant amounts of time and money. When the 3% rate hits, the costs will be greater still.
“The Government should rule out any further increases to the minimum auto-enrolment contribution rate for employers. Equally, with the minimum employee contribution rising to 5%, we need to keep an eye on opt-outs. The danger is that these increases end up undermining the whole auto-enrolment project.
“Overall, this is a package of changes that increases the costs of running a small business. For the first time since 2010, we saw a contraction in the size of the UK business community last year. All Ministers and policymakers need to take note, and avoid bringing in new measures that would exacerbate this loss in 2019.”