Government ‘must act’ to avoid £1.95bn business rates rise
September’s Consumer Prices Index (CPI) measure of inflation, the headline rate of inflation, signals a £1.95bn business rates rise in England next April for the 2024-25 financial year for all business rates-paying companies without intervention from chancellor Jeremy Hunt at his upcoming Autumn Statement on 22 November, experts at commercial real estate intelligence firm Altus Group have warned.
How will the avergae pub be affected?
Statistics according to Altus Group:
2023-24
Average Pub Premises Rateable Value - £31,567
2023/24 UBR 49.9p
Liabilities - £15,751.93
75% Discount - £11,813.95
Average 2023/24 Pub Business Rates Bill - £3,937.98 (subject to business cap)
2024-25
Average Pub Premises Rateable Value - £31,567
2023/24 UBR 49.9p
Liabilities - £15,751.93
6.7% Inflationary Rise for 2024/25 - £1,055.38
Average 2024/25 Retail Business Rates Bill - £16,807.31
Average Pub Business Rates Rise Next April - £12,868.66
At the Autumn Budget in 2017, the 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 1 April 2018.
CPI rose by 6.7% in the 12 months to September 2023, unchanged from August. Altus Group forecasts September’s headline rates of inflation will now signal that gross business rates bills will rise by £1.95bn, of which £415m will be shouldered by the embattled retail sector which has shed around 60,000 jobs so far this calendar year.
Discount set to expire
Not only that, Hunt’s Autumn Statement in 2022 not only froze business rates for companies occupying retail, leisure and hospitality premises, it granted a 75% business rates discount up to a cash cap of £110,000 per business.
However, this discount was only a one-year commitment to be applied for 12 months from 1 April 2023 and is set to expire on 31 March 2024 with Altus Group forecasting the cost of that discount at £2.37bn warning now of a ‘double whammy’ tax rise in business rates of £4.32bn next April.
Altus Group global president of property tax Alex Probyn urged the Chancellor said: “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 but also permanently end the policy of increasing tax rates by inflation while maintaining the discount.
“Our clients tell us that the business rates burden is a disincentive to invest and are already at an unsustainable level.”
Bleak picture
Trade body UKHospitality (UKH) has also called for a freeze on business rates and an extension to the current relief package.
It claimed the planned inflation-linked rise in April will cost hospitality businesses an additional £234m. With the £630m that the ending of rates relief would simultaneously represent, this combination would leave hospitality facing a huge £864m in business rates costs next April.
UKH has urged businesses to write to their MPs to stress the need for action.
UKH CEO Kate Nicholls said: “Today’s figures finally confirm the bleak picture facing hospitality businesses next April. Almost £1bn in extra costs from business rates alone is unfathomable – and insurmountable – for many.
“Such dramatic cost increases would undoubtedly be the final nail in the coffin for many businesses. It would be particularly perilous for small, independent businesses, for which ongoing relief measures are a lifeline at a challenging time.
“Hospitality is at the heart of our communities and it’s essential we do all we can to protect them and the value they bring, from driving economic growth to creating jobs.”
