Chancellor John Healey is said to be considering changes to business rates relief that could exempt some businesses from the tax altogether, in a package of measures for his first Budget on 28 October.
The cost of doing business is expected to be one of the Chancellor’s key Budget themes. It was reported today that he has held a series of workshops with business groups over the past fortnight on reviving the UK’s shops.
The workshops follow Prime Minister Andy Burnham’s pledge to turn high streets, which he has called “markers of decline”, into a “symbol of Britain’s renaissance”. Mr Burnham has urged Labour to “listen to small businesses more” to boost growth.
One option is to raise the threshold for small business rates relief, which exempts firms in premises with a rateable value of less than £12,000. That figure was frozen while a nationwide revaluation took place. Uprating it in line with inflation would take it to £17,096, meaning thousands of companies could pay no business rates at all.
Tapered relief could also be introduced for businesses in properties with a rateable value of up to £20,000.
Bills rose for many ratepayers in April after the nationwide revaluation of commercial property, in some cases by as much as 80 per cent, with the increases due to be phased in.
A further option is to increase the Treasury’s transitional relief, designed to ease the impact of escalating bills, and to lengthen the transition period. Smaller firms currently have their bills capped at no more than 5 per cent this year, 10 per cent next year and 25 per cent in 2028-29, plus inflation.
Pubs and hospitality
Mr Burnham has previously promised business rates support for pubs, clubs and live music venues, a 20 per cent cut he says will save the average firm £1,100 a year from April 2027.
The British Beer and Pub Association estimates that raising the relief threshold from £12,000 to £18,000 would pull 5,000 pubs out of paying business rates. It would also reduce the tax bill for many coffee shops and smaller retailers.
More than four pubs are closing a day, according to the Campaign for Real Ale. Its chief executive told the Telegraph today: “We’ve long called for an increase in thresholds as this would help the local stay open, keep people in work, and remain the backbone of the community, and we’d strongly welcome this measure alongside a consideration of greater transitional relief.”
David Hale, government affairs director at the Federation of Small Businesses, which has lobbied the Treasury for more relief, said it would make the case for a “proper, sizeable increase to small business rates relief”.
He said “taking large numbers of small firms out of this dated tax altogether” was “an essential element of a pro-small business budget” and would help “to make a reality of the promise of breathing space to come”.
Kate Nicholls, chairman of UKHospitality, said the trade body was “working with the government to make sure that restaurants, cafes and hotels receive comparable support on business rate changes at the Budget”.
Mansion tax and defence
Mr Healey could also announce more support for entrepreneurs and go further on plans to buy British in public procurement, including in defence. He faces wider pressure on the public finances and a £5bn defence budget deficit left by Sir Keir Starmer, the former prime minister.
A Treasury spokesman said: “As has always been the case, decisions on tax are a matter for the Chancellor to set out at fiscal events, rather than routinely commenting on rumour, speculation or proposals.”
Government sources have confirmed that Mr Healey is looking at widening the so-called mansion tax, officially known as the high value council tax surcharge, to properties worth more than £1.5m. Up to 300,000 homes could be affected, particularly in London and the south-east.
The Mail on Sunday reported on 5 July that Mr Burnham could lower the threshold from £2m to £1.5m, leaving householders in the new bracket facing four-figure sums in tax. Mr Burnham has previously dismissed the tax as too “symbolic” and said it leaned into “the politics of envy” when it was championed by the former Labour leader Ed Miliband in 2015.
