As the founder of InvoiceNet, I have the privilege of working with small business owners, freelancers, and sole traders who rely on us to keep their finances organised and invoices under control.
I imagine the real challenges they face—rising costs, unpredictable incomes, and the constant push to stay competitive in a fast-changing economy. So, when the Chancellor delivered the latest UK budget, my immediate thought was…
“How will this impact my customers?”
For many of us, the budget speech brings mixed feelings.
It’s supposed to support our economy, encourage growth, and offer protection for those who need it most. But the reality on the ground, especially for smaller businesses, is that new policies often lead to new hurdles and new concerns in the lead up to the budget let alone when it is announced.
I wanted to take the time to share a breakdown of how the recent UK budget could affect sole traders and small businesses, like yourself, and some of the concerns I’ve been hearing since the announcement.
Energy Support Changes
Energy Bills Discount Scheme (EBDS) Extension
In a positive move for small businesses, the government announced a slight extension of the Energy Bills Discount Scheme (EBDS) through winter 2024-25.
This extension is limited, however, as the discount caps remain quite low, providing minimal financial relief for many small business owners who rely on energy-intensive operations or work from commercial spaces. Many businesses will likely still struggle to absorb high energy costs, especially those who were hoping for more substantial support.
Incentives for Green Energy Upgrades
The budget introduced new grants and low-interest loans for businesses transitioning to energy-efficient infrastructure, such as solar panels and heat pumps.
While this is a step in the right direction, smaller businesses with limited cash flow may find it challenging to invest in green technologies, even with incentives. This “green push” feels more accessible for larger firms with more capital, while small businesses and sole traders may feel left out of the benefits.
Increased NICs and Business Taxes
Rise in National Insurance Contributions (NICs) for self-employed individuals and small employers.
NICs for self-employed earners now face an incremental percentage increase, which may impact the disposable income of sole traders and sole proprietors.
Small businesses with employees will also see a rise in employer NICs, potentially putting additional pressure on their payroll budgets.
Corporation Tax for small businesses remains unchanged
Despite this appearing to be a welcome announcement, there was no additional relief, which many hoped for to offset the increased NIC burden.
The absence of targeted tax cuts for small businesses and sole traders in the current economic climate has left many feeling that the government could have done more to ease the strain.
VAT Threshold Adjustments
VAT threshold remains the same
To the disappointment of many sole traders, the VAT registration threshold has not been raised in this budget. It remains frozen at £85,000, meaning that more small businesses and freelancers who are experiencing growth will now need to register for VAT, increasing their administrative load and potential costs.
Many hoped for an increase in this threshold to better align with inflation, which would have allowed small businesses to grow without immediately being subjected to complex VAT rules. The freeze means that sole traders and small businesses will need to navigate the potential administrative costs and pricing challenges of VAT compliance.
Cost-of-Living Support
Targeted Cost-of-Living Support for Low-Income Self-Employed Workers
The budget introduced some targeted cost-of-living support, specifically aimed at low-income self-employed workers.
Measures include a temporary fuel duty reduction and specific grants to help with essential costs. While this may help lower-income self-employed individuals, it has limited benefits for middle-income small business owners who feel the pressure of rising costs but don’t qualify for these reliefs.
Finance and Investment Support
New low-interest loan programs
To address the financing gap, the government introduced new low-interest loan programs for small businesses aimed at encouraging investment in growth and technology upgrades.
However, small business owners and sole traders have expressed concerns about eligibility criteria and application complexity, making it challenging for those with limited resources or experience in navigating government finance schemes.
Increased funding for regional investment programs
The budget also increased funding for regional investment programs.
While this could benefit small businesses in certain areas, many of our customers have voiced concerns that eligibility requirements and grant application processes are overly complex, which could make it difficult for the smallest businesses to access this funding.
Skills Development Programs and Apprenticeship Support
Expansion of the Apprenticeship Support Program
The government announced an expansion of the Apprenticeship Support Program with additional funding for SMEs to hire apprentices.
There’s also new funding to help small businesses upskill their staff through local colleges and training providers. While this is a positive move, some small business owners are worried that the program is still tailored more toward larger businesses with established training departments. There is also uncertainty over how quickly these initiatives will roll out and reach smaller businesses that need immediate support in finding skilled talent.
Digital Transformation Incentives and Compliance
Digital Tax Breaks and Incentives
As part of the government’s commitment to digital transformation, the budget introduced tax breaks and incentives for small businesses investing in digital technologies and cybersecurity.
This could include support for things like e-invoicing systems, CRM tools, and cybersecurity upgrades. The challenge, however, is that these incentives often come as tax relief after the fact, requiring businesses to invest upfront—a challenge for those with already limited cash flow.
Making Tax Digital (MTD)
The Making Tax Digital (MTD) initiative continues to push forward, with the government reiterating its commitment to full digital tax reporting.
While MTD is aimed at making compliance easier in the long term, many sole traders feel underprepared and are concerned about additional costs tied to compliance, such as hiring accountants or adopting digital tools.
Quick Recap Of Points To Be Aware Of:
- Energy Bills Discount Scheme (EBDS) Extension
- Incentives for Green Energy Upgrades
- Rise in National Insurance Contributions (NICs)
- Corporation Tax for small businesses remains unchanged
- VAT threshold remains the same
- Targeted Cost-of-Living Support for Low-Income Self-Employed Workers
- New low-interest loan programs
- Increased funding for regional investment programs
- Expansion of the Apprenticeship Support Program
- Digital Tax Breaks and Incentives
- Making Tax Digital (MTD)
Final Thoughts: The Road Ahead
The October 2024 budget delivered some useful measures for larger companies and those able to invest in green technologies and skills development, but for sole traders and small businesses, the benefits seem limited.
Energy cost support, financing options, and training programs are steps in the right direction but often feel out of reach or overly complex for smaller, leaner operations.
At InvoiceNet, we’re committed to supporting our customers, as we all navigate these changes together over the next few months. The journey might seem challenging, but we’re here to help our community stay resilient, informed, and prepared.
It’s why despite constant to increases to the cost of living and doing business, we’re committed to keeping our services at only £5 and providing all new customers with 30 days free.
Let’s continue to support each other as we adapt to these latest budget changes,
Alex Goodwille, UK Director at Invoicenet Ltd.
