Shadow chancellor urges government to freeze business tax rises

Shadow chancellor Andrew Griffith is set to call on the Labour government to rule out further tax increases on businesses at the upcoming Budget. In his first major address since assuming the role, Griffith will argue that the current fiscal environment is placing an unsustainable strain on small firms and the self-employed. He intends to press Chancellor John Healey and Prime Minister Andy Burnham to use the 28 October Budget as an opportunity to simplify the tax system and halt the planned expansion of the Making Tax Digital programme.

Griffith will announce a new review of the tax burden facing small businesses, which is led by Conservative peer Lord Mackinlay and Robert Colvile, the outgoing director of the Centre for Policy Studies. The review is scheduled to report its findings in December. It will examine the performance of HMRC, the complexity of filing returns and claiming reliefs, and the specific tax treatment of the self-employed. Additionally, the inquiry will assess the IR35 off-payroll working rules, considering whether changes introduced in 2017 and 2021 have unnecessarily increased compliance costs. The Conservatives have previously pledged to reform IR35 and enhance HMRC accountability to small businesses.

During the speech at Capital City College Group in London, Griffith is expected to criticise the Labour government for squeezing small businesses. He will argue that excessive taxation and a complex system are working against these firms. The Federation of Small Businesses estimates that tax compliance costs smaller firms 25 billion pounds a year, with the average business spending 44 hours annually on tax administration. In contrast, HMRC puts the annual cost to businesses at 15.4 billion pounds. However, the National Audit Office has noted that the research underpinning the HMRC estimate has not been updated since 2015 and does not account for Making Tax Digital.

The announcement has drawn criticism from Reform UK, which is also targeting small businesses with its own package of tax and regulatory policies. Reform shadow chancellor Robert Jenrick accused Griffith of failing to tackle these issues while the Conservatives were in government. Jenrick pointed out that Griffith abolished the Office of Tax Simplification when the tax code was 23,000 pages long. He also criticised the Conservative record on IR35 and the VAT registration threshold. Reform has pledged to raise the VAT registration threshold from 90,000 pounds to 150,000 pounds, reverse the increase in employers’ National Insurance, and replace GDPR with a lighter-touch privacy regime. Jenrick argued that simply asking Labour not to raise taxes is insufficient and that Britain needs a radical change in direction.

Griffith will also call on Healey to pause the planned expansion of Making Tax Digital for Income Tax. The regime is due to cover sole traders and landlords earning more than 30,000 pounds from April 2027 before extending to those earning more than 20,000 pounds the following year. This debate comes as Burnham pledges a culture shift in how Britain does business, aiming to make it easier to start and grow companies. Meanwhile, over 800 hospitality firms have called for VAT on the sector to be cut from 20 per cent to 10 per cent, while unions are pressing for higher taxes on large technology companies and banks.