ith the General Election fast approaching on the 4th July, political parties across the UK have been announcing the policies that they want to introduce if they were to be elected to form a government for the next five years. Currently the polls are indicating that the Labour Party, the Conservative, and the Reform Party are likely to win the most votes- but what will the outcome of the general election actually mean for businesses?
At Nordens, we understand that it can be pretty overwhelming when it comes to working out which party is going to best serve the interests of your business, so that’s why we’ve produced a quick summary showing how the outcome of the General Election will accept businesses through a number of key areas such as VAT, Corporation Tax, Business rates, Incentives/Reliefs and the self-employed.
What would a Labour government do for businesses if they win the General Election:
The Labour Party are led by Sir Kier Starmer and have served as the Opposition Party for the last 14 years following their defeat in the 2010 General Election. Here’s how the policies of the Labour Party would affect business:
VAT
- The Labour Party have ruled out increasing VAT across the next five-year parliament, meaning that it would stay at, or below the current rate of 20%
- They have not ruled out changes to the VAT eligibility thresholds which determine when businesses must register for VAT. This could mean it increases or decreases in the future.
Corporation Tax
- The Labour Party would set a cap at the current rate of 25% but have said they would be willing to act if tax changes in other countries threaten the competitiveness businesses in the UK (At 25% the UK currently has the lowest corporation tax in the G7).
- Within the first six months, publish a roadmap for business taxation for the next parliament to allow businesses to plan investments.
Business Rates
- The Labour Party wants to scrap business rates in England and replace them with a system of business property taxation that is “fairer for bricks and mortar businesses”.
- They say that the new system will level the playing field between the high street and online giants, better incentivise investment, tackle empty properties and support entrepreneurship, but haven’t expanded on details in their manifesto.
Incentives and Reliefs
- Labour have promised to make the UK “the best place to start up and scale up” by reforming the British Business Bank to better support SMEs in regions across the UK and unlocking the supply of patient capital for technology-intensive, early-stage businesses.
- They also want to boost small businesses’ access to public sector contracts with a “national procurement plan” that includes cutting red tape and requiring that at least one small or medium sized business makes the shortlist when any smaller, suitable contract goes out to tender.
Self Employed
- Labour have pledged to not increase National Insurance as well as the basic, higher, or additional rates of Income Tax.
- They have also committed to take action on late payments to ensure small businesses and the self-employed are paid on time.
Minimum Wage
- Labour would remove age bands, so all adults are entitled to the same minimum wage.
What would the Conservatives do for businesses if they won the General Election?
The Conservatives are led by Rishi Sunak who has been the Prime Minister since 2022 and is bidding to lead the party to their fifth consecutive win in a General Election. Here’s how the outcome of the General Election would affect businesses if the Conservative Party won.
VAT
- The Conservative Party have ruled out increasing VAT across the next five-year parliament.
- They promise to keep the threshold under review and mention smoothing the cliff edge of the current £90k threshold.
Corporation Tax
- The Conservatives have pledged to not raise Corporation Tax paid by businesses above the current rate of 25%.
Business Rates
- The Conservative Party have announced a business rate support package worth £4.3 billion over the next five years to support small businesses. The finer details of how this would work have not been expanded on in their manifesto.
Incentives and Reliefs
- The Conservative Party have promised to retain key tax incentives after the General Election that encourage small businesses to grow, including the Enterprise Investment Scheme, Seed Enterprise Investment Scheme, Venture Capital Trusts, Business Asset Disposal Relief, Agricultural Property Relief and Business Relief.
- Additionally pledge to maintain R&D tax reliefs and build on the nine specialist Catapults which support innovation and de-risk the transition from research and delivery.
- Lift the employee threshold so that more companies can be classed as medium-sized for tax exemption schemes.
- Create more Freeports and Business Rates Retention zones and continue backing Investment Zones across the country.
- Also want to improve access to finance for SMEs including through expanding Open Finance and by exploring the creation of Regional Mutual Banks.
Self Employed
- The Conservatives plan to abolish National Insurance for self-employed workers within the next five years. They’ve also said that these changes won’t affect their entitlement to a state pension.
Minimum Wage
- The Conservative party have pledged to maintain the National Living Wage
in each year of the next five years at two-thirds of median earnings. This could mean that it rises to around £13 an hour.
How would a Reform UK government affect businesses?
Led by Nigel Farage, the Reform Party were founded in 2018 as ‘The Brexit Party’ but changed their name to Reform after the UK left the European Union. Here’s what the Reform Party want to do for businesses if they win the General Election:
VAT
- The Reform Party want to lift the VAT threshold to £150,000, meaning that more smaller businesses would be VAT exempt.
- They also want to reduce VAT from 20 to 18%.
- They’ve pledged to scrap the payment of VAT on energy bills.
Corporation Tax
- The Reform party would lift the minimum profit threshold to £100k.
- They would also reduce the main Corporation Tax Rate from 25% to 20%, then to 15% from year 3 onwards.
- Additionally, firms would pay higher rate of national insurance on foreign workers- 20% compared to 13.8%.
Business Rates
- The Reform Party want to abolish Business Rates for high-street based small & medium firms after the General Election.
- This would be offset with an online delivery tax at 4% for large, multinational enterprises to create a fairer playing field.
Incentives and Reliefs
- The Reform Party would cut entrepreneur’s tax relief to 5%.
- They would also create SME Enterprise Zones for ‘left-behind’ areas with a period of zero tax for new or existing businesses that are creating jobs.
- Tax relief for businesses that undertake apprenticeships.
Self Employed
- The Reform Party have pledged to abolish IR35 so that contracted or self-employed workers do not pay the same amount of income tax and NICs that a permanent employee.
Minimum Wage
- No indicative policies have been announced as of yet.
We hope that this guide has given you some more information on what the general election means for your business. It’s worth noting that the policies included in parties manifestos are not an exhaustive list of things that they’d like to do. However, it’s generally seen as being a big mistake for parties to break manifesto pledges that they’re elected on meaning it is unlikely that they would change their mind unless there were serious economic reasons to.
Understanding the complexities of new legislation and how it effects your business can be confusing…but you don’t have to navigate it alone! At Nordens Chartered Accountants, we offer expert advice and assistance across all of your business needs: from your everyday accounting to Advisory, Tax, Audit and more! Whatever you need guidance or assistance with, we have the knowledge and expertise to support you.
For support with any accounting services, look no further than Nordens Chartered Accountants. Contact us today at 0208 530 0720 or fill out our contact form to schedule a consultation.
