As news of the credit crunch continues to dominate the financial pages, many are over looking the problems many entrepreneurs are forecasting after the increase in small business tax from 10% to 18%.  Recent research has shown that the vast majority of small business owners are very concerned about the lack of funding for inward investment, with many looking to delay or even cancel already planned expansion plans.  So why have the government taken this path?

After a campaign by a whole host of small business groups the Treasury had indicated that they were willing to listen and consider changing the new tax rules for small business – after initially simplifying the whole tax system. After much spin and bluff, nothing has happened and the government are now stuck between a rock and a hard place, unable to back track because they will losing facing, and attracting the continuing wrath of the small business environment.

Despite many promises to simplify the small business regulatory arena, the government have undone any good work of late, in one foul swoop.  A near doubling of the tax rate for smaller companies has ripped the heart out of many, coming at a time when the economy is set for a major shift downwards. What could go wrong has gone wrong for the Treasury over the last few weeks, and we are set to see more heartache for many industry leaders.

Where is the incentive to invest their own money and take a risk? Where is the incentive to fund new projects? Where is the incentive to even consider starting a new business?

Finance costs have risen substantially, taxes have nearly doubled over night and the economy is turning down.  Can there be a worse situation for the band of UK small company entrepreneurs?