Tina McKenzie
FSB Chair, Policy and Advocacy
The Federation of Small Businesses (FSB) was founded over fifty years ago to support small businesses and the self-employed. Over the decades, the challenges faced by entrepreneurs and our work has evolved, but one constant remains: the need to plan for the future.
For many entrepreneurs, the future remains uncertain when it comes to retirement. Some might prefer to cash in on their pension if they have one, and others might be banking on selling their business to fund their later years.
Auto enrolment has seen millions of workers enrolled into a pension scheme. However, the proportion of self-employed people saving into pensions has been in decline for some time. With the increasing number of self-employed, particularly those going into self-employment at an earlier age, policymakers cannot ignore the need to encourage and incentivise entrepreneurs to save for retirement.
This report shows the importance of making it easier for entrepreneurs to save flexibly through existing accounting or online banking applications, essentially, removing the bureaucracy and making the process easier.
Many rely on selling their business to fund their retirement because they struggle to access traditional pension plans. But that is not always easy to do. Entrepreneurs’ Relief (now called Business Asset Disposal Relief), which reduces the Capital Gains Tax rate to 10 per cent on qualifying business sales, has been instrumental in allowing business owners to retire with financial security. While it is welcome that Entrepreneurs Relief was retained up to a threshold of one million pounds at the 2024 Budget, the plans to increase the rate payable upon sale of a business raises the risk that business owners will be less comfortable in retirement, and may be less inclined to invest in their business.
Some choose to pass their business onto a family member, and family-run businesses are an important part of our ecosystem. They should be allowed to continue doing that without the worry that future generations will need to break them up or sell them on to avoid a hefty tax bill.
The final part of our report series highlights how the Government needs to make the UK a more – not less – attractive place to start a business.