Small business blue Monday strikes, says FSB
Two million small businesses are being hit with new reporting requirements due to Making Tax Digital (MTD) program from today.
Firms across the UK are bracing for a week of new cost increases and reporting requirements, with the Federation of Small Businesses (FSB) calling on government to support those impacted and rule out the introduction of fresh burdens.
From today, HMRC is expecting VAT-registered businesses to comply with its MTD initiative. The software required to meet MTD obligations alone is set to cost small firms £564 each, it has been estimated.
The third year of the business rates revaluation period, which began on 1 April 2017 in England and Wales, also starts today, meaning thousands of firms will lose transitional caps on their rising bills.
According to FSB, business rates are set to generate £25 billion for local authorities in England this year. The 10 local authorities set to rake-in the most from rates over the next 12 months are: Westminster (£2.2 billion), City of London (£1.2 billion), Camden (£650 million), Tower Hamlets (£461 million), Birmingham (£449 million), Hillingdon (£384 million), Leeds (£378 million), Manchester (£335 million), Kensington and Chelsea (£332 million) and Southwark (£328 million).
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 per cent of an employee’s qualifying earnings, up from 5 per cent last year. Employers will be required to shoulder 3 per cent 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, and impact differentials.
"This truly is blue Monday for small business owners, and it comes at a time when confidence is already in the doldrums," FSB national chairman Mike Cherry said.
"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."
The FSB said it is particularly worrying that the changes are taking effect at a time when the Small Business Index (SBI) stands at -5.0. The index is in negative territory for the third straight quarter – a first in its nine-year history.
"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 per cent hike to their bills plus an inflation-linked increase," Mr Cherry judged.
He demanded that the government rule out any further increases to the minimum auto-enrolment contribution rate for employers.
"Equally, with the minimum employee contribution rising to 5 per cent, we need to keep an eye on opt-outs. The danger is that these increases end up undermining the whole auto-enrolment project," Mr Cherry added.
"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," he concluded.