Inflationary tax rises based upon September’s Consumer Prices Index (CPI) measure of inflation, the headline rate of inflation, coupled with the loss of the 75% business rates discount for retail, hospitality and leisure firms in England will mean a 300% rise in business rates for more than 250,000 high street premises in England next April.
According to the commercial real estate intelligence firm Altus Group, the average shop will now see its business rates bill spiral from £3,589 to £14,599 next April for 2025/26 without intervention from the Chancellor at her upcoming Autumn Budget on 30th October.
Whilst the average business rates bill for pubs will increase from £3,938 to £16,020. Restaurants will see their average bill rising from £5,051 to £20,548.
‘Double Whammy’
At the Autumn Budget in 2017, the previous Conservative Government switched the annual uplifting of business rates for inflation from the Retail Price Index (RPI) to the lower headline rate of inflation (CPI) in the preceding September from 1st April 2018.
CPI rose by 1.7% in the 12 months to September 2024, having eased from 2.2% in August, falling now below the Bank of England’s target rate. Altus Group forecasts that September’s headline rate of inflation will now signal business rates bills across all sectors of the economy will rise by £488 million in England next April, of which £224 million will be shouldered by the retail, hospitality and leisure sectors.
Tax rates were frozen for the current financial year for those businesses occupying premises in England with a rateable value below £51,000 whilst retail, hospitality and leisure firms were also granted a 75% business rates discount up to a cash cap of £110,000 per business. 252,414 eligible properties such as shops, restaurants, pubs, cafes, hotels and the like currently receive that discount.
This discount was only a one-year commitment to be applied for 12 months from 1st April 2024 and is set to expire on 31st March 2025 with Altus Group forecasting the cost of that discount at £2.41 billion and warning now of a ‘double whammy’ of massive tax rises in business rates for high street firms next April.
Alex Probyn, President of Property Tax at Altus Group, urged the Chancellor to use her Autumn Budget on 30th October to act decisively saying “the Chancellor must not only set stringent targets for the clearance of tens of thousands of outstanding Challenges to facilitate the return of years of overpayments allowing firms to invest that money and grow their businesses but also look at ways of permanently ending the policy of increasing tax rates by inflation annually and how to lower the burden once and for all rather than leaving firms on this an annual cliff edge.”
