ENTREPRENEUR Ryan Howsam, who grew up in a council house and now runs a £1.3billion business, has slammed Labour’s Budget as an ‘absolute disaster’ for small firms.
In an exclusive interview with The Sun, the insurance boss warned that Labour’s recent Budget will kill family businesses and force firms to cut wages.
The founder and CEO of insurer Staysure blasted changes to inheritance tax, National Insurance and minimum wage.
Mr Howsam set up his first business at 19 and is now the chief executive of a major, family-run insurance company which employs over 700 people.
Family-run businesses form around 86% of the UK’s private sector, according to the Family Business Research Foundation, most of which are considered “small to medium” businesses (SMEs).
But several changes announced in the Budget last week were targeted at increasing costs for those firms, which Mr Howsam says will see more firms close and a loss of opportunities for everyone.
For example, he said the government’s increase to the Living and Minimum Wages by 6.7% and 16%, respectively, as well as employers’ National Insurance will mean firms have to cut wage growth.
Meanwhile, he said the changes to bring family business assets into the scope of inheritance tax (IHT) will force more family businesses to close, or their families will have to sell them at a reduced price to pay the tax bill.
“I don’t really think [the Budget] served lower-income households very well, as minimum wage growth and the National Insurance increase will hit businesses’ ability to grow, and that will ultimately mean there’s less wage growth and less opportunity,” he explained.
“And the changes to inheritance tax are an absolute disaster.
“I come from a council house background, so I’m as working class as you get and I understand people having less disposable income.
“But this narrative that Labour has got that we should hammer anybody who has got money and wants to succeed is like biting the hand that feeds you. Why would you do that?
“These are the people bringing the cash in and paying the majority of our tax.”
Changes to bring family businesses into the scope of inheritance tax (IHT) will mean families having to pay 20% tax on assets over £1million.
Previously, family businesses were exempt from IHT if left to a loved one.
But now this exemption will only apply to the first £1million of assets in the businesses, which Mr Howsam says means families will have to sell their busniess at a reduced price to pay the remaining tax bill.
“Most family businesses are not quoted on the stock market, which means HMRC will have to put an arbitrary value on them, and then the family has just got to come up with that money,” he explained.
“If you take a business valued at £4million, that business might only have £100,000 in the bank, but 20% of £4million (without business relief on the first £1million) is £800,000. Where are the family going to get £800,000 from, plus interest?
“They won’t – the only way the money will come in is it they sell the business for a lot less than it’s worth because they are desperate.
“So, these families have worked their whole lives, but they will be forced to sell the business or try to come up with an awful lot of money. It’s a really stupid move.”
Mr Howsam added that targeting wealth and businesses will ultimately end up increasing taxes for everyone if those people decide to leavfe the UK.
“Around 4,500 millionaires left the country last year, and this year it’s forecast to be 9,500 millionaires,” he said.
“You may think that doesn’t matter, but it does matter, because the top 1% of taxpayers pay 28% of HMRC‘s tax take – and then there’s the money they spend, which puts their tax take up to 36%.
“If those people leave, who do you think is going to have to pay more? The country is just getting less well off as a result.”
The government’s plan to also include pensions in the scope of IHT will also mean far more people end up paying the death tax, he said.
Currently, only around 4% of families pay IHT, but Mr Howsam says the changes in the Budget will trickle down and start hitting mid-to-low income families.
“IHT is going to hit middle income people in a big way, and then it’s going to start coming down towards lower-income people too, if they have a bigger pension pot,” he said.
In the Budget last week, Labour announced a raft of measures to fill a £22billion “black hole” in the country’s finances allegedly left by the previous government.
A few of those measures included the changes to IHT, a crackdown on benefit fraud, a hike in tobacco duty and a stamp duty increase on second homes.
However, there was some good news for savers in the Budget.
Benefits like Universal Credit and Attendance Allowance will rise by 1.7% in line with September’s inflation figure. Ms Reeves also confirmed the state pension will rise by up to £473 next year.
The minimum wage is also set to rise for workers aged 21 and over by 6.7% from next April from £11.44 to £12.21.
We have rounded up legal ways to avoid inheritance tax here.
WE scoured the Budget documents to find these announcements hidden in the small print . . .
CHILD BENEFIT REFORM AXED
THE reform to base Child Benefit on total household income will not be going ahead.
Under current rules, two parents earning £59,000 a year – £118,000 in total – receive the benefit in full.
But a household could have a lot less in total income and not get the full payment if one of the parents earns over £60,000. This will now remain the case.
‘HELP TO SAVE’ EXTENDED
THE Government will extend the current Help To Save until April 5, 2027.
The scheme, where those on low incomes and Universal Credit can get a cash bonus of £1,200 over four years, was due to end in 2025.
‘MORTGAGE GUARANTEE’ PERMANENT
BUYERS can get a 95 per cent loan-to-value mortgage through the mortgage guarantee scheme which is now being made permanent.
The scheme had been set to end next year.
SELF-ASSESSMENT SHAKE-UP
A BUMPER £16million will be invested to modernise the HMRC’s app so self-assessment taxpayers can make voluntary advance payments on their tax bill in instalments.
STAMP DUTY RELIEF
FOR first-time buyers, Stamp Duty will rise from April – but you have five months to make a purchase and beat the increase.
An independent mortgage broker can help you work out how much you can borrow to set your budget.
