Small Business Saturday: Liberal Democrat proposals to cut taxes for small businesses

Please see below a template press release to use for Small Business Saturday, on Liberal Democrat proposals to cut taxes for small businesses.


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Small Business Saturday Template: Lib Dems demand tax cuts for small businesses in [AREA]

This template can be used in England, Scotland and Wales.

Please use this data sheet to add in the relevant figures for your area from each of the three tabs.

Lib Dems call for tax cuts for [INSERT NUMBER] small businesses in [AREA]

  • Ahead of Small Business Saturday, local Lib Dems call for small businesses in [AREA] to be given a tax cut, saving them an average of £5,000.
  • The tax cut would help businesses including local restaurants suffering from Christmas cancellations following new Covid restrictions
  • Figures reveal hit to businesses in [AREA] from Conservative National Insurance tax rise

Ahead of Small Business Saturday, the Liberal Democrats have called for taxes to be slashed on small businesses. Local Liberal Democrats have backed the proposals which would benefit [INSERT NUMBER - TAB 1] small businesses and entrepreneurs in [AREA], from cafes and restaurants to high street shops.

The proposed tax cut would save small businesses an average of £5,000 a year by aiding them with staff costs. It would be achieved by quadrupling the Employment Allowance to £16,000 for a period of two years. This would allow a small business to employ five people on an average salary without paying any National Insurance contributions. 1.1 million businesses would be eligible for this tax cut, which would save them an estimated £5.5 billion next year.

It comes as a record number of small businesses say they are struggling with rising costs whilst new Covid restrictions loom, according to a recent survey by the Federation of Small Businesses. Local restaurants have also reported a surge in Christmas bookings being cancelled, setting owners back thousands of pounds.

Meanwhile, the Conservatives have announced small businesses will have to pay more National Insurance contributions in the new year, despite facing a tough winter. Research by the House of Commons Library has shown the Conservative plans are set to hit an estimated [INSERT NUMBER - TAB 2] local businesses in [AREA] with a [INSERT NUMBER - TAB 3] tax bombshell.

XXX spokesperson for [AREA] Liberal Democrats, said:

Our local shops and restaurants are the backbone of our community and must be helped through a tough winter. Businesses in [AREA] are struggling with mounting bills and worries about the impact of the new Covid variant in the coming weeks. We need to help them now with a big and bold offer.

"It is disgraceful that local businesses in our area are being forced to pay even more tax by this Conservative government. We should help small businesses who have already suffered so much during the pandemic. That is why I am backing calls for our local businesses to receive a tax cut.”

Leader of the Liberal Democrats, Ed Davey MP, said:

Cafes, shops and start-ups are all looking at this winter with dread, yet all Boris Johnson can muster up is a massive new tax bill. The Conservatives must be living on another planet if they think the answer to business owners’ problems is to put up their taxes.

"This country was promised tax cuts by the Conservatives, but yet again their promises have been proven not to be worth the paper they are written on.

"People and businesses need help now. I want to give our dedicated local business owners and entrepreneurs a helping hand, and to truly unleash Britain’s potential.”

ENDS

Notes to Editor

Figures on the number of small businesses that would benefit from the Liberal Democrat proposals by constituency are available at Small Business Saturday 4 December: Local figures by constituency, along with local figures on the impact of the Conservative National Insurance tax hike.

FSB Small Business Confidence report

Additional background

Quadrupling the Employment Allowance to £16,000

  • The Liberal Democrats are calling for a tax cut which would save small businesses up to £16,000 a year. This tax cut would be achieved by quadrupling the Employment Allowance to £16,000.
  • The tax cut would allow any small business whose annual NICs bill is less than £100,000 to employ 5 people without paying any NICs - provided they are paid the median UK salary (£31,285).
  • 1.1 million businesses would be eligible for this tax cut, which could give them a cash injection up to £16,000 a year. 86% of claimants could end up employing at least half their staff tax-free (930,000 EA claimants employ 1-9 people).
  • This tax cut should stay in place for a minimum of two years to support the UK’s economic recovery from Covid-19. It should then be reviewed and extended accordingly.
  • According to the ONS, UK median annual pay for 2020-21 stood at £31,285. A salary at that level equates to employer’s NICs worth £3,097 at the current rate of employer’s NI, and £3,378 at the new rate of NI set to be introduced in April 2022.
  • We estimate that this policy would cost £5.5 billion a year. According to HMRC, raising the EA by £1,000 (from £3,000 to £4,000) will cost the Government £455 million in 2021-22. This implies the current cost of the policy at £4,000 is £1.82 billion. Quadrupling the allowance would cost an additional £5.5 billion compared to the policy’s current cost.
  • This means that this £5.5 billion cash injection would translate to an average tax saving of £5,000 across the 1.1 million eligible businesses.
  • Employment Allowance takeup statistics for 2020-21, including takeup on a regional and constituency basis can be found here.

SMEs affected by the National Insurance rise per constituency - House of Commons Library Methodology

  • Local area data shows that there are 2.77 million VAT and/or PAYE based enterprises in the UK. This suggests that there are around 1.17 million businesses with 0 employees (2.77 million minus the Government’s estimate of 1.6 million businesses with at least 1 employee). These 1.17 million businesses were shared across local areas using each area’s share of the UK’s businesses with 0-4 employees.
  • The Library shared the estimated 640,000 businesses who won’t pay the levy between local areas using the share of the UK’s businesses with 0-4 employees in each area (the same approach as with the 1.17 million businesses with 0 employees).
  • For each local area there is data on the number of businesses with 0-4 employees. The Library estimated the number of businesses in each area with 1-4 employees who are paying some additional NICs by subtracting the estimates that come out of the two above bullet points from the actual data on businesses with 0-4 employees.
  • The Library assumed that all businesses with over 4 employees will pay the health and social care levy.
  • This analysis does not account for different earning levels in each area and therefore should be seen as an indicative estimate.