This opinion piece is by Gary Ross from blip Insurance
Did you know that Sir Keir Starmer is the son of a toolmaker? At last count, he’s mentioned it approximately 47,000 times. It’s the claim that both shields him against charges of metropolitan elitism, while allowing him to claim he understands the struggles of ordinary working people.
So it’s rather awkward that the Chancellor’s latest Budget has just made life considerably harder for today’s toolmakers. She has frozen income tax thresholds for another three years; hiked dividend tax; and capped pension salary sacrifice. All while insisting Labour is “pro-business and pro-worker.”
But in my view, the most telling part of the Budget isn’t what the Chancellor did raise, but rather what she didn’t raise at all. Namely, the trading allowance, which allows people to earn £1,000 from small-scale business activity tax-free. First introduced in 2017, it has remained at that level ever since. Meanwhile, inflation has risen 30 percent since then. In other words, that allowance today is really only worth £700.
Within the massive stealth tax from frozen income tax thresholds, the trading allowance, already eroded by eight years of inflation, gets frozen for another six years. It’s a freeze within a freeze, hitting the smallest businesses hardest.
The government recently announced that it will raise the Self-Assessment reporting threshold from £1,000 to £3,000 from 2027. But the problem is that the actual tax-free allowance remains £1,000. You’ll still owe tax on everything above that first thousand; you’ll just file less paperwork through a new simplified system.
At Blip, where we insure micro-businesses across the UK, we see what this means in practice. The plumber doing weekend jobs. The parent selling handmade goods online. The tradesperson with a disability who can manage self-employment but not conventional work. For them, the difference between a £1,000 allowance and a properly indexed £3,000 allowance isn’t academic. It’s the difference between survival and surrender.
According to an open letter by a coalition of business groups, including the Federation of Small Businesses, raising the trading allowance to £3,000 would cost under £500 million annually. In a £1.2 trillion budget, that’s pocket change. Loose coins down the Treasury sofa. Yet it would support 300,000 micro-businesses directly.
Compare that to what the Budget did provide. New capital allowances for big firms. Reformed Enterprise Management Incentives. Higher limits for Venture Capital Trusts.
Consultations on making founder reliefs more generous. All worthy stuff, if you’re already big enough to have venture capitalists returning your calls.
Andy Fishburn, managing director at Virgin StartUp, described the continued stagnation as “disheartening” and said that even indexing the threshold to inflation would have helped small business owners.
The message couldn’t be clearer: if you’re a scaling tech startup, Labour loves you. If you’re a tradesperson trying to make ends meet, you’re on your own.
The frozen allowance doesn’t exist in isolation. From my perspective as an insurer, I see the perverse incentives the current system creates. That first £1,000 isn’t pure profit. Much of it covers materials, insurance, accounting fees, and travel costs. The effective marginal rate feels punitive.
Britain risks entrenching a two-tier economy: formal employment versus an expanding informal sector where people work cash-in-hand because declaring income isn’t worth the hassle. For a government that claims to be pro-worker, this should be alarming. The informal economy is where exploitation thrives and protections disappear.
There’s a broader political point Labour seems not to grasp. The party promised to be “pro-business and pro-worker.” Freezing the trading allowance while raising dividend tax and extending income tax threshold freezes hits micro-enterprises hardest. Without targeted support, this means that Labour’s vision is about redistribution, not empowerment through enterprise.
In 2025, “making work pay” can’t just mean raising minimum wage or scrapping the two-child benefit cap. It must mean creating space for millions whose work patterns don’t fit neat employment boxes.
This isn’t really about economics. The numbers work. The case is overwhelming. This is about values. Does Labour believe in creating pathways to prosperity, or does “pro-business” mean throwing money at tech companies while ignoring everyone else?
Sir Keir loves reminding us his father was a toolmaker. Fine. But if today’s toolmakers continue watching their allowance erode while billions flow to private capital, that origin story rings rather hollow.
Britain’s economy isn’t built by tech companies alone. It’s built by thousands of people taking small risks, earning modest incomes, and trying to build something from nothing. The son of a toolmaker should understand that.
Apparently, he doesn’t.
Gary Ross is CEO of Blip Insurance
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