We now know that the Labour Party will form the next government. But whilst all the parties mentioned small businesses in their manifestos, it was hardly a priority compared to the NHS, housing, immigration and crime.
So now the dust is starting to settle, we can all start to look more closely at what Labour’s win means for the small business and sole trader community.
Labour did make a promise last year that if they were to win the election, they would give small business owners a central focus within their agenda. But in the cold light of day, it remains to be seen whether promises made by vote-seeking politicians will turn into action.
With this in mind, we’re looking at what the pledges made by Labour are likely to mean for the small business owner.
Late payment help
Labour recognised in its manifesto that the UK’s “small firms, entrepreneurs, and the self-employed face unique challenges”.
One of the biggest issues is late payments. Official estimates suggest that £20 billion is locked up in the unpaid invoices of UK small businesses at any one time.
Labour plans to eliminate late payments by bringing in new laws to make larger companies reveal how quickly they pay their suppliers. This would involve forcing the audit committees of big firms to disclose their company’s payment practices via annual reports.
Business rates reform
Labour has been openly critical of the current business rates system. Businesses pay rates on commercial property, with the level of tax based on how much rent could be charged on the premises annually.
Labour has said that it intends to replace these central government-set business rates with a new taxation system, although this system is, as yet, undisclosed.
It was said that the reforms will work in such a way that they reduce the costs for small businesses and high streets, to ensure that the bigger players pay their fair share.
Business energy bills
One of Labour’s core pledges is to establish Great British Energy, a publicly owned clean power company. The idea is that this company will help reduce small business energy bills.
The extent to which this will impact energy bills in practice is unclear, however. And net zero goals are likely to push prices up in the short term.
Access to public contracts
Labour has pledged to “level the playing field” by simplifying the process for smaller businesses to access potentially lucrative government contracts.
Under the party’s proposals, at least one small business would have to be included on the shortlist whenever a suitable public contract is tendered.
Simplifying exports
Labour has said it hopes to make the exporting process easier for small businesses. Its plans are to offer guidance to smaller companies, and to remove some of the barriers that are currently preventing them from selling their products to overseas markets.
A new-look British Business Bank and banking hubs
Reforms to the British Business Bank are on the table. This is the state-owned lender which is in place to provide funding for start-ups.
The party’s manifesto promised to give the bank a ‘stronger mandate to support growth in the regions and the nations’.
What this will actually mean in practice remains to be seen. However, the Federation of Small Businesses has said this measure would be “a positive step” to ensure financial backing for businesses UK wide.
Labour has also said that it will aim to introduce new high street banking hubs for businesses and consumers. Funded by the banks, this measure will guarantee access to face-to-face banking in every community, making it easier to access banking services for those who dislike online-only banks.
Taxation and the VAT threshold
Whilst Labour’s tax plans are being kept close to their chest, the party has pledged to continue with the freeze on income tax thresholds introduced by the Conservatives.
This means many workers – including sole traders and freelancers – will end up paying more tax thanks to the process of fiscal drag, where more workers are pulled into higher tax bands without being any better off.
There has been talk that Labour may reduce the VAT threshold, which was raised in the Spring Budget by the Conservatives. This may be a tactic that the party employs to fund public services, pushing more businesses to charge VAT and leaving them with more of an administrative burden.
The party has, however, confirmed that Corporation Tax will be capped at 25%. Whilst a cut would have been welcomed by business owners, the good news is that it won’t rise.
National Living Wage
Labour has pledged to introduce what it calls a “genuine living wage”. This it will do by forcing the Low Pay Commission – the independent body that advises the government on the National Living Wage and the National Minimum Wage – to include the cost of living in its recommendations.
It has also promised to remove any age-related eligibility requirements for this higher wage. This would mean that the National Living Wage would apply to all adult workers, rather than just those aged 21 and over as per the current system.
This will of course have a knock-on effect of increasing costs for employers.
Changes to employment law
During the election campaign, Labour focused on a ‘plan to make work pay’, which means employers should prepare themselves for a raft of changes to employment law, as the party seeks to strengthen employee rights.
There are more than 60 proposed changes to employment law, and the party has pledged to bring in most of these within their first 100 days of taking office.
From day one rights to basics such as unfair dismissal, sick pay and parental leave, to the strengthening of existing rights for the likes of pregnant workers, whistle-blowers, those being made redundant and those subject to TUPE processes, default flexible working rights, family friendly policies, Menopause Action Plans and workplace well-being support, there is plenty on the agenda.
Keeping track of changes
Here at Office Assistants, we’re dedicated to keeping track of changes within the small business landscape so that we can ensure the advice we are providing our clients with is of the highest value.
If there is anything you would like to discuss concerning your small business bookkeeping or accounting processes, you are welcome to get in touch.
