Budget announcement comments – Reward Funding
Income tax frozen
Many will have breathed a sigh of relief with the announcement that income tax will not be increasing. While this continuation will provide some stability, freezing thresholds will still drag many into higher rates. The fiscal drag will lead to belt-tightening from consumers, directly impacting businesses across the country. This type of stealth tax isn’t always a headline grabber, but it will hit SMEs hard. When households feel squeezed, optimism across business dims. This kind of pressure makes decisiveness harder.
Fuel duty freeze and increase
In a surprising move, the fuel duty freeze is being extended to September 2026. However, this will be short lived. Following this, the duty will rise annually by the RPI measure of inflation, while there is also a new electric vehicle excise duty that extends cost even for those who’ve chosen more sustainable vehicles. This will impact SMEs across the country reliant on vehicles to keep their business moving. On top of this, it will affect retail and hospitality industries whose suppliers will feel pressured to increase prices to offset costs. Fuel hikes don’t just dent margins, they stall momentum.
Apprenticeships support introduced
We’re incredibly pleased to see the move in this budget to support apprenticeships in SMEs. The announcement that funding will be provided to make training for under-25 apprenticeships completely free for small and medium enterprises will be welcomed by all. For businesses needing to upskill new recruits, but without the funds to do so, this will mean growth can be achieved and momentum gained.
National Insurance unchanged
After last year’s shock hike, SMEs finally get some breathing room. We saw how last year’s increase led to hesitancy in investment and hiring. This year, no new NI rise means hiring plans can come off pause. For businesses on the edge of expansion, this clarity isn’t just helpful – it’s a green light for growth. It emphasises the point that businesses cannot and will not wait to be ‘done to’, they have to shape their own momentum and drive forward their own growth.
Retail, hospitality and leisure
It is comforting to see the introduction of a permanently lower tax rate for eligible businesses in retail, hospitality and leisure. The current relief of 40% on a business rates bill has helped SMEs, but this will certainly take it a step further. Momentum comes from support, and innovation cannot be stifled.
Corporation tax
We welcome the decision to reduce the ‘write down allowance’ main rate and crucially to introduce a new 40% first year allowance, meaning businesses can write off a greater portion of their investment costs upfront. For SMEs just starting up, it will be the difference between postponing investment and getting the business moving. Resilience will rise, productivity will increase and confidence will grow.
Summary
This budget marks a noticeable shift in comparison to last year, with SMEs avoiding a specific blow. At a macro level getting borrowing down, growing the economy and seeing inflation forecast to decrease are all positives, but are they achievable?
Increases to minimum and national living wages are of course fantastic, but they will need to be paid for. In the world of SMEs, where many businesses are already struggling, prices will have to increase, jobs cut or investment scaled back.
The devil is in the detail here. Balancing the benefits of apprenticeship support and amendments to the RHL sectors are positive and will support the high streets regeneration, but underlying issues with fiscal drag, fuel duty increases and new taxes must be considered and addressed. Overall, we’re seeing a bigger tax burden with the chancellor aiming for an additional £26bn in revenue, which will undoubtedly weigh on businesses. This is ultimately a political budget which increases tax to pay for increased benefits, with very little mention of business and business investment.
With confidence already weak, the business climate is tough and the economy unstable. Things will likely get tougher before they get better. Waiting for policy to catch up isn’t an option, ambitious SMEs know they need to create their own opportunities. At Reward, we are ready to fund that ambition and drive forward the businesses who are the lifeblood of this economy.