Keir Starmer warned the Budget was “going to be tough”. He wasn’t wrong when it comes to the impact on business.

As widely predicted, employers’ National Insurance contributions were high on chancellor Rachel Reeves target list. And she did not hold back with measures to raise £25bn a year for government coffers.

The rise from 13.8 per cent to 15 per cent is high enough but the significant reduction in the threshold at which businesses start paying NI on a workers’ earnings – from £9,100 to £5,000 – delivers a heavy blow to already under pressure employers.

There was also confirmation that the basic rate of Capital Gains Tax will rise from 10 per cent to 18 per cent, while the higher rate will increase from 20 per cent to 24 per cent.

The chancellor told the Commons her mission was growth and said: “The only way to drive economic growth is to invest, invest, invest.”

However, the tax rises, coupled with increases in the National Living Wage that also came with the Budget, will have many business owners asking themselves if they should or could invest in their growth.

The chancellor has been at pains to stress there would be no tax rises for ‘working people’. The fact is that the measures she has announced will have an impact on them in the real world when it comes to creating jobs and investment by their employers in their futures.

There was some good news for the hard-pressed retail, hospitality and leisure sectors with a 40 per cent relief on business rates to help the high street.

The small business tax multiplier, which applies to properties with a rateable value of less than £51,000, will also be frozen next year.

And a cut in the duty on draft alcohol by 1.7 percentage points meant1p off the price of a pint.

The freeze on fuel duty will also remain in place, which is some comfort for businesses operating transport fleets.

As with all Budgets, the devil is in the detail, however, overall, the negatives for business owners would seem to far outweigh the positives. ‘Tough’ just about sums it up.

The bottom line of the Budget announcements is, it you are an employer or business owner, it may be necessary to re-group and update your business plans for 2025 and onwards.

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Eight sectors have been selected as the focus of the new government’s ‘modern’ industrial strategy which has been widely welcomed by business leaders.

The aim is to create a “pro-business environment” and play to the UK’s strengths, with the focus on growth driving sectors including creative industries and financial services.

Business secretary Jonathan Reynolds has pledged an end to instability, declaring “our modern Industrial Strategy will hardwire stability for investors and give industry the confidence to plan for the next 10 years and beyond.”

The key sectors the strategy will concentrate on are: advanced manufacturing; clean energy industries, creative industries; defence; digital and technologies; financial services; life sciences and professional and business services.

The government says “ambitious and targeted sector plans will be designed in partnership with business, devolved governments, regions, experts, and other stakeholders, through bespoke arrangements tailored to each sector.”

It has also been announced that Clare Barclay, chief executive of Microsoft UK, will chair government’s new Industrial Strategy Advisory Council.

The council is being set up to inform the development of the strategy through its expertise and latest evidence, working with business, trade unions, devolved governments, local leaders and academia.

The government is also asking business to help shape the strategy after publishing a green paper to kickstart its delivery earlier this month.

Views are being sought from business, international investors, unions and any other interested parties, on the overall vision, approach to growth sectors and the policy levers needed to drive investment.

The approach has been widely welcomed. Stephen Phipson, chief executive of Make UK, said: “We live in a world which is massively different to a decade ago and simply leaving the economy and, industrial strategy, to the free market is an ideology which is long past its sell by date.

“This is a welcome first step in addressing the Achilles heel of the economy which has left the UK an outlier among advanced countries.

“It sets out a clarity of vision for how the resources of government and, in particular, each department can be convened towards a single objective of long-term growth across all regions.”

Dr Roger Barker, director of policy at the Institute of Directors, added: “The government’s green paper is a necessary first step in the development of an industrial strategy which provides a more stable and predictable framework for business investment.

“It is important that time is taken to get it right, so that policy commitments are shielded from short-term political pressures, facilitating the willingness of the private sector to make long-term investment decisions.”

Tina McKenzie, policy chair at the Federation of Small Businesses (FSB), said: “This is a refreshingly thoughtful approach for UK industrial policy. If it’s coupled with a clear pro-small business agenda at the Budget, there will be renewed optimism that the Government can get its growth mission right.

“It will be crucial that the developing strategy is responsive to the needs of the whole supplier base, particularly where the interests of suppliers and their big customers don’t align, and that policy levers are selected that have the reach needed to give a positive business platform for small firms.

“Small businesses need a renewed focus on economic growth and it’s encouraging that this consultation emphasises the need to drive investment and provide opportunities across our economy and through our international trading relationships.

“This is so much more than having an industrial strategy ‘document’. We agree that partnership will be key to creating a nurturing environment for small firms to thrive in.

“It’s crucial the strategy works for small firms, as well as big, and addresses the issues that SMEs deal within these sectors and areas – and we look forward to working with government to provide the small business voice as the strategy moves forward.

“Small firms are keen to innovate and take on new technology, yet are often held back by a lack of time and funding. We hope that this strategy will place a renewed emphasis on enabling small firms to use new ideas and tech, increasing their adoption further, boosting R&D support and increasing the UK’s productivity.”

The industrial strategy and growth-driving sector plans will be published alongside the Spending Review in spring 2025.

The warnings are clear. Prime Minister Keir Starmer has already declared this month’s Budget is “going to be tough”. The only question is: Just how tough?

The run-up to October 30 has seen intense speculation on what tax hikes chancellor Rachel Reeves will announce when she stands up in the Commons to deliver her speech.

And again, the writing has been on the wall, as she has now started talking about a £40bn funding gap – almost twice the size of the £22bn “black hole” Labour identified on taking office.

If the pundits are right there are going to be some big announcements around taxes that will have impact on both businesses and individuals.

From inheritance tax to fuel duty, the reports all point to a wide range of options being considered in the government’s bid to raise the cash it needs as it looks, in its own words, to “fix the foundations”.

Little wonder the North and Western Lancashire Chamber of Commerce has reported that “taxation anxiety” is in the air for many businesses.

The chancellor is planning to increase the amount of money the government raises in inheritance tax, according to a BBC report.

It is not known how many people are likely to end up paying more, or how much more they would pay under the plans that are reportedly under consideration.

The BBC says it is understood multiple changes to the tax, which currently includes several exemptions and reliefs, are on the table.

Inheritance tax is charged at 40 per cent on the property, possessions and money of somebody who has died above the £325,000 threshold.

The tax includes a series of exemptions which over the years several governments have considered changing in order to raise more cash. It seems Labour is ready to bite the bullet.

Senior government figures have also been hinting that there will be increases to the amount of National Insurance (NI) paid by employers.

There has been growing speculation that the chancellor will scrap the NI exemption on employer pension contributions.

That has led to warnings such a move could hit payments into staff pension schemes and slow hiring or future pay rises, with small business hit the hardest.

Martin McTague, national chair of the Federation of Small Businesses has warned that adding employer NI to pension costs would be “one way of shrinking small business employment even more in 2025”.

A second option for the chancellor could be to increase the rate at which employers pay NI on their employees’ earnings.

Other reports have claimed Rachel Reeves is considering raising taxes levied on entrepreneurs when they sell their businesses.

That would mean cutting a capital gains tax easement known as business asset disposal relief.

It currently allows entrepreneurs to pay a reduced tax of 10 per cent on lifetime gains of up to £1m (subject to certain conditions), rather than the standard 20 per cent levy.

There has been mounting speculation that capital gains tax will rise in the Budget – with some reports forecasting a rise in line with income tax bands – meaning rates of 20 to 40 per cent – but that the chancellor will exempt property from the new rates.

In other pre-Budget speculation, there are reports fuel duty is expected to rise by up to 7p per litre, along with tax hikes for ‘non-doms’.

And when it comes to the property market stamp duty exemptions are likely to be ended. The lower stamp duty threshold for first-time buyers is set to be scrapped, according to some reports.

Investors and entrepreneurs have warned Britain will lose fast-growing startups if the government raises capital gains tax (CGT) in its October budget.

CGT is tax on any profits or gains you make when you dispose of an asset. Assets not only apply to the sale or exit of business but can also apply to the sale of items such as offices and trademarks. Even the goodwill built up by your company could ultimately be taxable.

According to a report by business news provider Bloomberg, Gibraltar, Dubai, Bermuda and the US may appear more attractive to startup chiefs if there is a CGT hike.

There are also fears that any hike in the rate will deter investment, not only in large businesses, but in SMEs.

Speculation is growing that capital gains will be targeted by the Treasury as the new Labour administration looks to plug what it describes as a £22bn black hole in the government’s finances.

Chancellor Rachel Reeves has declined to rule out a rise after warning that difficult decisions will have to be taken – a stance also taken by prime minister Sir Keir Starmer in recent speeches.

In an interview with Bloomberg Television, Ms Reeves said that the UK will strike the “right balance” on tax at the Budget on October 30.

The chancellor said: “Of course you need to bring in the revenue to fund vital public services, but we’ve also got to grow the economy.

“I won’t do anything that makes it harder to achieve that economic growth and prosperity.”

According to some reports, she may be planning to increase the rate of CGT in line with income tax.

Analysis by wealth management firm Quilter has warned that if that happens it would mean landlords could face paying an average of £11,000 extra when disposing of property.

Currently basic rate taxpayers are charged 18 per cent on gains and higher rate taxpayers are charged 24 per cent. Raising rates in line with income tax would increase these figures to 20 per cent and 40 per cent respectively.

When he was chancellor, former Tory prime minister Rishi Sunak was reported to have shelved a proposal to hike CGT to help him plug the post-Covid hole in his finances.

The Office of Tax Simplification (OTS) had recommended changes to CGT to bring it to the same levels as income tax, after being asked by the chancellor to carry out a review of the system.

The OTS had also proposed lowering the annual allowance on the tax – a levy on any profit made when selling an asset.

However, according to reports, the then chancellor had pointed to the “burden” such a proposal would place on tax collectors.

A minister at the Treasury was said to have told the OTS at the time: “These reforms would involve a number of wider policy trade-offs and so careful thought must be given to the impact that they would have on taxpayers, as well as any additional administrative burden on HMRC.”

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Small business confidence fell back into negative territory in the second quarter of this year as firms looked with trepidation at the government’s employment rights shake-up.

The FSB’s Small Business Index (SBI) lost all the ground made up by the first quarter’s welcome return to positive sentiment among small firms.

Construction was the least optimistic of the main sectors but the wholesale and retail sector was not far behind.

The new government has declared its Employment Rights Bill, unveiled in the King’s Speech, as “the biggest upgrade to workers’ rights in a generation”.

It says the bill is designed “to make work pay”. It will see a ban on what it describes as “exploitative” zero-hours contracts, end fire and rehire, and introduce basic employment rights from day one.

The bill will make parental leave, sick pay, and protection from unfair dismissal a day one right for all workers – subject to probationary periods.

It will also make flexible working the default from day one for all workers and update trade union legislation, removing restrictions on trade union activity and simplifying the statutory recognition process.

According to an FSB report, following the King’s Speech, nine out of ten small employers were concerned about the prospect of increased costs and risks when they employ people.

Commenting on the latest SBI findings, Tina McKenzie, FSB’s policy chair, said: “After a strong start to 2024, we were all hoping that the latest quarter would be just as positive for small businesses – if not more so. But sadly, it was not to be.

“Small businesses are looking with trepidation at the government’s forthcoming plans to change employment, which could both increase risk around small businesses employing people, and the costs when they do.

“The rise of labour costs will hold back economic growth, and points to the possibility of a contraction in small business job numbers, which would be terrible news for firms, for staff, for local communities and the national economy.”

She added: “Taxes and employment costs are already soaring for small employers. The government should formally index the Employment Allowance to the rising living wage to help alleviate pressure on small firms and resolve the economic inactivity crisis.

“Every line in the government’s employment plans must be checked for negative impact on growth and jobs.

“The construction sector’s woes, with the lowest confidence reading among the major sectors, underpins our calls for more support for small housebuilders, such as reforming the consumer infrastructure levy, so small building firms can access the finance they need.

“The government’s 1.5 million homes target cannot be achieved without new policies to unlock the potential of small housebuilders.

“With reported revenues in the second quarter not matching the predictions small firms made at the start of the year, there are signs that the small business community found the going tough.”

She went on: “We’re still waiting for action from the government on the long-running sore point for small firms of late payment.

“This could be tackled by giving audit committees of large firm’s oversight of payment practices in their annual reports – something that would not cost the government a penny, but which could help millions of small businesses’ cashflow improve significantly.

“Overall, the small business community is looking for reassurance from the government that it is listening to their concerns, especially around tax and employment.

“The fall in confidence among small firms is disheartening, but need not become a self-fulfilling prophecy. With the right support, we know that small businesses can thrive and drive the economic growth that the government has said is its priority.

“Now, as we head into the next quarter, we’re staring down the barrel at some tough challenges if we want to rebuild confidence.”

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