Breaking News: A Budget full of surprises, & none, for Business Rates.
Our initial summary of Labours first Budget.
The new Labour government kept their cards very close to their chest following their huge general election win regarding business rates. Their stated aim in their manifesto was to “replace the business rates system, so we can raise the same revenue but in a fairer way” – but there had been no mention of any policy on business rates, rating lists, multipliers nor reliefs until this afternoon.
So anything mentioned today was going to be a surprise, but nothing overly surprising given the doom-mongering that the Labour frontbench has been laying on thick in their first 100 days.
The Headlines:
- From 2026/27, there will be a 2-tier multiplier so that lower rates will be applicable for Retail, Hospitality and Leisure properties and an increase in the multiplier for the highest Rateable Values (£500,000+) to fund the change
- Reliefs:
- Retail, hospitality and leisure relief has been continued for 2025/26 but reduced to 40% – cap remains at £110,00 per business
- VAT exemption and Business Rates charitable Relief will be removed for Private Schools, from 1st January and 1st April 2025, respectively
- The Small business rates multiplier (for RVs less than£51k+) will remain at £0.499. Therefore, we anticipate that the standard multiplier will increase (in line with CPI) to £0.555)
What wasn’t mentioned:
No mention on any replacement of the business rates system was announced, which is a surprise given that the Chancellor, Mrs Reeves, proudly stated at the dispatch box, on the taxation on public schools: “promises made and promises fulfilled!”.
This surely shows that political expediency is alive and well regarding manifesto pledges compared to being handed the keys to the Treasury.
However, although not mentioned in Mrs Reeves speech, was yet another consultation: “Business Rates: transparency and disclosure of information on business rates valuations”, which is requesting further views on the proposals set out in the last business rates consultation. By our calculations, this is the 32nd consultation on how to improve the business rates system since 2010.
Labour seems to have realised that an easily collected, easily enforced taxation system such as non-domestic rating is one that Labour is in no position to replace.
Final Thought – fairness?
Is is a two-tier multiplier in favour of one collective of sectors to punish large occupiers (in Rateable Value terms) really a way to drive growth in the economy, if this then makes leasing large floorplates unattractive to those companies that employ thousands of UK tax payers?
