The Budget aftermath: What now for entrepreneurs?

Jos White of Notion Capital conducts a Budget biopsy. Here are the long-term consequences for UK entrepreneurs of the Chancellor's tinkering with fiscal policy.

by Jos White
Last Updated: 06 Nov 2012
Now that the dust has started to settle on the Budget and the ‘granny tax’ has been the focus of the headlines, I thought it was time to take a look at the longer term impact it’s going to have on entrepreneurs and small business owners.

It has long been my opinion that the best way to make the UK an appealing place to set up a business is to have an entrepreneur-friendly tax environment. In recent years, I think the government has made some positive moves, such as doubling the lifetime limit for capital gains tax through Entrepreneurs’ Relief to £10m. Perhaps what could be considered for the future is removing the limit altogether? By doing this it will give entrepreneurs every opportunity to succeed, with no limits for the ultra-ambitious entrepreneurs across Europe.

Scrapping the 50p tax rate

Deciding to take the 50p tax rate back down to 45p is a good start. Talent is incredibly mobile these days: it can work almost anywhere in the world. High tax rates drive the most skilled workers (who can command substantial pay packets) to friendlier tax environments elsewhere. The UK needs to make sure that this talent is welcome and nurtured here instead.  

The Budget has brought in some enterprise friendly reductions in corporation taxes, but the Coalition needs to be wary that it doesn’t appear to be trying to penalise personal success, which would fly in the face a little of the fact that the UK is very much open for business to entrepreneurs and businesses.  

Investing in seed stage businesses – recycling entrepreneurial skills

Seed funding can be make or break an early stage business. It’s a high-risk investment and banks are often unwilling to provide the funds, so introducing a relief of 50% on personal seed stage investment with the Seed Enterprise Investment Scheme (SEIS) send a really positive signal.

One of the best ways to nurture an entrepreneurial ecosystem is to encourage successful entrepreneurs to invest in smaller businesses – recycling their skills and experience as well as money. This kind of recycling is standard practice in the US and played a big role in Silicon Valley's growth.

Budgeting for growth

Generally speaking, this Budget could be seen as a bit of mixed bag for entrepreneurs. Corporation tax is down which will help businesses grow in the short term, but changes to personal taxation and other ways of getting money out of successful business-people could potentially be detrimental to the ambitions of individuals looking at starting a business in the UK.

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