Businesses Face ‘Stealth’ £1.5bn Tax Bill As One-Year Rates Surcharge Extended To Three

Businesses face a £1.5 billion surcharge to help fund relief for other ratepayers after the Chancellor reneged on a pledge to end a temporary 1p business rates surcharge next April.

The tax surcharge was introduced for one year only last November. The Autumn Budget extended it for another two years to help pay for new bill protections for retail, hospitality and leisure businesses.

Forecasts by global tax firm Ryan reveals the surcharge will generate £741 million across England this financial year. Repeating that annual amount over the extension would raise approximately £1.5 billion.

The Treasury has not published how much the extended surcharge will raise.

The 1p Transitional Relief Supplement adds £1 for every £100 of a property’s rateable value, the rental value used to calculate business rates. For premises with a £1 million rateable value, that means an additional £10,000 a year where the charge is payable.

It helps fund protection for businesses facing sharp increases following this year’s property revaluation allowing large increases to be phased in. Businesses outside that protection pay the surcharge.

But last year’s Autumn Budget announcement was clear: “This will apply for one year from 1st April 2026.” It will now continue until 31st March 2029.

Ryan’s analysis shows businesses in London face £247 million of the charge this year, with another £112 million falling on the South East. Together, they account for £359 million or nearly half of the total revenue the surcharge raises.

Westminster is the largest contributor at £57 million, followed by the City of London at £30 million, Camden at £19 million and Hillingdon at £17 million.

The Autumn Budget capped qualifying retail, hospitality and leisure bill increases at inflation for the next two years until the next revaluation.

Some hospitality and leisure properties faced among the steepest increases following the 2026 revaluation, with higher bills being phased in over the three-year rates cycle. Limiting those increases to inflation therefore provides substantial breathing space.

But businesses that did not need protection from sharp increases were told only last November that they would have to help fund that protection for others for one year. That has now become three.

More properties can also become liable as their existing protection against sharp increases runs out. Those businesses would have avoided the charge had it ended as originally announced.

Alex Probyn, Practice Leader, Property Tax, Europe and Asia-Pacific at global tax firm Ryan, said:

“The high street deserves breathing space, but stability and certainty should extend further.

“This is a stealth tax rise for businesses which had every reason to expect this additional cost to disappear next April. Businesses cannot plan with confidence if the Government moves the end date beyond
its previous commitments.

“Passing that bill to other employers and other sectors of the economy leaves them with less to invest, expand and create jobs. Helping one business by taking more from another does not make the wider economic cost disappear.”