- Business owners want reforms to taxes on selling businesses, less concerned about day-to-day taxes on trading
- 101 MPs and over 700 business owners surveyed
MPs and business owners fundamentally disagree on which taxes should be reformed to boost growth, according to research by Price Bailey, the Top 30 firm of accountants.
The research revealed that the primary concern of business leaders are taxes on business sales, such as Capital Gains Tax and Business Asset Disposal Relief, whereas MPs are overwhelmingly concerned about business property taxes.
Asked to choose up to three taxes for reform, business leaders prioritised business sales taxes, followed by employment taxes (National Insurance Contributions) and Corporation Tax.
The principal concern of MPs was business rates, followed by taxes on business sales, then profit distribution taxes (taxes on dividends).
Although MPs’ second highest priority was business sales taxes, just 32% of MPs said they should be reformed, compared to 53% of business leaders.
Price Bailey commissioned YouGov, the leading market research company, to undertake the research. 101 MPs were sampled and over 700 business owners and board level executives. Click here for the full report
Price Bailey says that the results reveal a gulf between what business leaders and MPs think should be the tax reforming priorities for this Parliament. Surprisingly, business leaders are far less concerned about being taxed on their day-to-day profits than the capital gain when they sell their businesses, which suggests that the hike to business sales taxes in the Autumn Statement could be far more damaging to business confidence than MPs realise.
Chand Chudasama, Partner in the Strategic Corporate Finance Team at Price Bailey, comments:
“Politicians and business leaders have starkly different priorities when it comes to tax. There is a tendency to assume that business leaders are more concerned about day-to-day trading taxes than they are with one-off taxes, such as Capital Gains Tax, which they pay on the sale of their businesses. The opposite is true.”
“Despite the increase in employer National Insurance contributions from April, business leaders are more concerned about the taxes on business sales which were also hiked in the Autumn Statement. Not only do taxes on business sales raise very little in revenue, but they also have a disproportionate impact on new business formation.”
“Surprisingly, only slightly over a third of business leaders identified taxes on dividends as a problem. In effect, business owners are quite happy to earn less through dividends so long as they get to enjoy the capital upside.”
He adds: “The overwhelming concern of MPs about business rates is likely explained by what they see as the complexity and unfairness of the tax, which falls disproportionately on High Street retailers. Many MPs would like to shift the burden more towards online-only retailers. Business rates constitute just 14 percent of the total tax burden for UK businesses, however, so it’s a relatively minor tax to command such attention.”
Price Bailey explains that the Government’s commitment not to increase taxes on “working people”, together with the perception that Capital Gains Tax is only paid by the affluent, left it with little option but to hike employment and business sales taxes, the two options least favoured by business leaders.
Chand Chudasama says: “The Government had very little room for manoeuvre in the Autumn Statement but this research shows that it ended up increasing the taxes most likely to damage business confidence.”
According to Price Bailey, the changes in business sales taxes announced in the Autumn budget are as follows:
- Capital Gains Tax: the main rate of CGT increased from 18% to 24% from 30 October 2024. The Business Asset Disposal Relief (BADR) and Investors’ Relief (IR) rate will increase from 10% to 14% from 6 April 2025 and to 18% from 6 April 2026
- Inheritance Tax (IHT): Changes were made to the Business Relief (BR) rules, which reduce or eliminate the value of a business from the IHT charge. From April 2026, the 100% relief will only apply to the first £1 million of qualifying property, with a 50% relief for any amount above that threshold
