Liberal Democrats call for £5.5bn-a-year tax cuts for small businesses
The Liberal Democrats are calling for Rishi Sunak to bring in a package of tax cuts for small businesses that would be worth up to £5.5bn-a-year.
Party leader Ed Davey said “Boris Johnson must be living on another planet” if he thinks his government’s planned tax rises, which will increase the country’s tax burden to its highest level since the 1960s, are “the answer to business owners coping with spiralling costs”.
The Lib Dems today called on the government to quadruple the Employment Allowance for two years, which would allow businesses to decrease their National Insurance bill by £32,000.
This would mean that the average small business with less than 10 employees would pay no National Insurance for two years.
Davey’s proposal would also see the recent decision to increase National Insurance Contributions for employers and employees by 1.25 per cent scrapped.
“This country was promised tax cuts by the Conservatives, but yet again, their promises are proven not to be worth the paper they are written on,” Davey said.
“We can’t wait another two years for Tories to cut taxes on businesses. People and businesses need help now. We want to give dedicated local businesses owners and entrepreneurs a helping hand, and to truly unleash Britain’s potential.”
Sunak announced increases to National Insurance and Corporation Tax over two Budgets this year as a response to record public spending during Covid-19.
His plans will see Corporation Tax increase from 19 to 25 per cent for businesses that record £250,00+ annual profits.
Sunak has promised to cut taxes before the next election, which is due to happen in 2024 at the latest.
Professor Len Shackleton, labour market expert at the free market Institute of Economic Affairs think tank, said ” tightened tax rules, a dysfunctional business rates system and excessive regulation” were stifling businesses post-lockdown.
“While it is good to see the Lib Dems showing awareness of the problems of micro businesses, these particular proposals may not be the answer,” he said.
“Rhey are time-limited when businesspeople need longer-term reassurance. Any exemptions for smaller outfits inevitably create a cliff-edge effect where growing employment from 5 to 6 employees involves a greater cost than expanding from 4 to 5.
“The government would be better advised to cut taxes while reforming business rates, merging national insurance and income tax and finally lighting a bonfire of regulations. “
A Treasury spokesperson said: “We’ve been there for small businesses throughout the pandemic with a £400bn package of support including grants and tax cuts that has protected millions of jobs.
“Since its introduction we’ve already doubled the amount of the Employment Allowance to £4,000, with over a million businesses benefitting in 2020-21. And more than 600,000 of the smallest businesses will not pay our Health and Social Care Levy as a result.”