Register to get free articles
Want unlimited access? View Plans
Already have an account? Sign in
Fears over increases in taxes on entrepreneurs have seen the run-up to Budget Day reportedly trigger a 71% jump in the number of businesses deciding to close, according to a new study by Mazars.
The firm explained that an average of 1,308 businesses per month are “wound up” voluntarily by their owners in the month before a Spring Budget or Autumn Statement, compared with 764 per month in all other months.
Its study found that a major reason for these spikes in closures is the worry among business owners that the chancellor may increase the tax on them and take capital out of their businesses. This is said to potentially cost some millions of pounds in extra tax if they closed their businesses after a change to tax rules in the Budget.
It reported that spikes in business closures have been occurring for several years in a row, with many of these closures being premature and costing the economy jobs while also stunting its growth.
Though a major tax rise for entrepreneurs did take place in the March 2020 Budget, businesses are reportedly even less incentivised to grow their businesses as there is now further speculation that tax rates for entrepreneurs may be increased. This is “likely” to lead to more businesses closing.
Simon Chandler, partner and head of restructuring services at Mazars, said: “Speculation about rises in tax on entrepreneurs has been a feature of almost every Budget for much of the last decade. These figures show it genuinely has an effect on businesses, employment and the economy overall.
“If entrepreneurs are afraid that the government will suddenly increase tax rates, they are more likely to take money out of their businesses. That is money that isn’t being invested in growth, machinery or new staff.”
He added: “It would be good to see the government commit to now leaving tax rates for business owners untouched for several years. Entrepreneurs ideally want a stable environment to invest in and grow their businesses.”
