Labour’s Autumn Budget is just around the corner (30 October) and many businesses are uncertain of what the next few years may hold for them.
The Prime Minister Keir Starmer has already warned of a “painful” Budget, with big changes to taxation, funding for public services, and incentives for investment.
For businesses, these changes can influence operational costs and market dynamics, so it is important to prepare your organisation and ensure it is agile and able to adapt.
Possible incoming changes
Labour has proposed focusing on correcting fiscal imbalances while ensuring that businesses pay their fair share towards public funding.
While they have confirmed that there will be no changes to Income Tax, VAT, and National Insurance contributions (NICs), this has sparked speculation about other areas of taxation that they may target.
We could potentially see further changes to certain tax reliefs, such as R&D Tax Credits or capital allowances.
Labour is also expected to review taxes on wealth and dividends, potentially increasing the tax burden business owners and shareholders.
The Government has expressed its interest in supporting green initiatives and social enterprises.
This could come in the form of incentives or grants for businesses restructuring their operations to align with environmental or social goals.
Is it time to restructure your business?
Given the potential tax, regulatory, and incentive shifts, restructuring your business now could provide several strategic advantages including:
Adaptability to change
Restructuring your business can enhance agility, enabling you to better respond to both challenges and opportunities.
For example, breaking large teams into smaller, autonomous units can allow quicker decision-making and better alignment with shifting market demands or regulatory changes.
Key strategies include:
- Ring-fencing key operations – By splitting core functions into separate legal entities or divisions, you protect critical assets from risk, enabling faster adaptation in response to regulatory or economic changes. This method also allows for the easier sale or spin-off of non-core divisions, should market conditions make it advantageous.
- Dynamic decision-making frameworks – Smaller, decentralised units can operate under tailored decision-making frameworks that focus on quick responses to local or sector-specific developments, ensuring that the business is better positioned to capitalise on changes.
Resource allocation
Given the way tax reliefs and incentives are changing, now is a good time to reassess your business’s resource allocation strategy.
Areas to focus on might include:
- Maximising capital allowances – With temporary super-deductions and first-year allowances available for certain capital expenditures, now may be the optimal time to invest in new equipment or machinery. These enhanced allowances can deliver significant tax savings and improve cash flow.
- Utilising R&D tax credits – If your business invests in innovation, you could benefit from Research & Development (R&D) tax reliefs. Large companies can claim RDEC (Research and Development Expenditure Credit), while SMEs may qualify for enhanced deductions or cash payments. This can offset staffing and capital costs associated with innovation and technological advancements.
- Green tax incentives – With Labour’s focus on sustainability, aligning your business with environmentally friendly practices can provide access to tax benefits such as capital allowances for energy-efficient equipment and enhanced deductions for expenditure on clean technology. Additionally, businesses operating in certain sectors may be eligible for grants and tax credits by adopting socially responsible initiatives.
Attract and retain talent
Adapting your talent strategy to meet current challenges can help your business stay competitive, particularly given potential changes to employment law and tax treatment of executive pay.
You might want to consider implementing the following:
- Reevaluating executive compensation structures – Higher taxes on executive pay could make traditional cash-based compensation less attractive. Implementing alternative schemes, such as share option plans (e.g., EMI schemes for smaller companies) or deferred compensation tied to long-term business performance, could mitigate the tax impact while still incentivising key executives.
- Offering non-monetary benefits – In light of potential changes in employment law, businesses should focus on enhancing non-monetary perks such as flexible working arrangements, wellness programmes, or professional development opportunities. These benefits can boost employee retention without raising taxable compensation, while also positioning your business as a more attractive employer to top talent.
- Career growth opportunities – Developing a clear progression path and investing in upskilling initiatives can foster loyalty and morale among employees, particularly in a competitive job market. Aligning roles with the long-term goals of your business not only improves efficiency but also boosts employee satisfaction.
What should you do next?
If your business is considering restructuring, it is better to act early.
Engaging professional advice from your accountants can help ensure your restructuring strategy is aligned with both the current state and future direction of the UK economy.
By proactively adjusting to Labour’s policy shifts, your business can be better positioned for long-term success.
If you would like advice on restructuring your business ahead of the Budget, please contact our team.
