Good news and bad on business rates. The positive policy in the Budget was that business-rate reliefs that had been due to end next April will now be extended. Less happily, they will not be so generous, and there is still no detail of Labour’s promised overhaul of the much-criticised business rates system. The headline numbers are worrying. Businesses in the retail, hospitality and leisure sectors are entitled to discounts of up to 75% on their business rates bills under a scheme introduced by the last government during Covid. From next April, these reliefs will come down to only 40%.
Analysis from property group Altus suggests these reductions could prove very costly, with 250,000 high-street premises in England facing an average 140% rise in their bills for the 2025-2026 tax year. The typical shop will see its business rates bill climb from £3,589 to £8,613 next April. The average restaurant will see its bill rise from £5,051 to £12,122.
There is worse to come. Business-rate reliefs will come to an end entirely in April 2026. Retail, hospitality and leisure firms will then face another big rise in costs unless other help is announced. Ministers note that these reliefs were always meant to be temporary and that eligible firms will still be getting more support than was available prior to the pandemic. Moreover, the retail, hospitality and leisure sectors are getting far more support than other businesses: firms don’t receive relief on factories, or on office or warehouse accommodation.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
However, critics say the Budget’s documents reveal that next year’s lower reliefs will cost firms £900 million. Effectively, this is another tax increase on top of the controversial national insurance hikes for employers. There is also frustration that Labour hasn’t yet published any plans for reforms of the system, which it promised prior to the election. Business rates have long been seen as outdated, putting businesses using bricks-and-mortar premises at an unfair disadvantage to those that largely trade online.
How to avoid business rates
The government is still promising business rates reform, with the chancellor committed to introducing a new system that offers more of a level playing field between physical and online businesses. So far, however, all it has announced is the Non-Domestic Rating Bill, which will enable it to calculate business rates in different ways for certain sectors – and thus reduce rates for certain businesses. While ministers have suggested leisure, hospitality and retail businesses could be beneficiaries here, the changes fall well short of Labour’s manifesto commitment to abolish business rates altogether. Business groups want a new system that is much more flexible and cuts the burden of property taxes. In the meantime, many small businesses can escape these charges by claiming small-business rate relief. This concession applies to firms using only a single property with a rateable value of less than £15,000. If you’re in a property with a rateable value below £12,000, there are typically no business rates to pay at all; for those rated between £12,000 and £15,000, a sliding scale of discounts applies.
A range of other reliefs could also prove useful. Many charities are eligible for business rates relief of up to 80%, and there are also schemes for groups including rural businesses, local newspapers and empty properties. In addition, the transitional relief scheme means that if your business property has been rerated under the recent revaluation scheme, there are caps on how much extra you can be asked to pay each year.
This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
-
Two thirds of easy access savings accounts come with restrictions – can you access your savings in an emergency?Out of the top 30 easy access savings on the market, 22 come with some sort of restriction on how fast you can access your money, according to new research.
-
Most popular London boroughs: Full list of in-demand places to move toA deluge of people move to or within Britain’s capital each year – but which area is the most popular? We look at the most in-demand London boroughs in 2025.
-
David Ellison: America's new media mogulDavid Ellison is building a mighty new force in old and new media. Critics worry that he will prove to be a Trumpian patsy. Is that fair?
-
How Next defied the odds and positioned itself as a British high-street stapleNext rose from a near-death experience and now thrives as a high-street staple. What's driving its success – and should you invest in the retailer?
-
Why investors should avoid market monomaniaOpinion Today’s overwhelming focus on US markets leaves investors guessing about opportunities and risks elsewhere
-
Can Rachel Reeves save the City?Opinion Chancellor Rachel Reeves is mulling a tax cut, which would be welcome – but it’s nowhere near enough, says Matthew Lynn
-
Global investors have overlooked the top innovators in emerging marketsOpinion Carlos Hardenberg, portfolio manager, Mobius Investment Trust, highlights three emerging market stocks where he’d put his money
-
Investors should cheer the coming nuclear summerThe US and UK have agreed a groundbreaking deal on nuclear power, and the sector is seeing a surge in interest from around the world. Here's how you can profit
-
Healthcare stocks look cheap, but tread carefullyShares in healthcare companies could get a shot in the arm if uncertainty over policy in the US wanes, but are they worth the risk?
-
The Palace of Westminster is falling downThe Palace of Westminster is in need of repair, but the bill is prohibitive, says Simon Wilson
