'Everyone focused on here & now but 2026 could be even worse'

Pubs are predominantly valued for the purpose of the business rates tax using ‘fair maintainable turnover’ unlike shops and offices for example that are based upon an estimate of rent. 

This type of valuation considers the annual level of trade (excluding VAT) the pub is expected to achieve if operated in a reasonably efficient way.

It’s also based on the type of pub or licensed premises, the area it’s in, the pub’s trading information as well as the services it offers, for example food, gaming, or sports screenings.

Further considerations include how much rent is paid, any income from accommodation as well as rents and turnovers of other pubs are considered.

The antecedent valuation date for the 2023 revaluation was 1st April 2021. This forms the basis of business rates bills for pubs from 1st April 2023 until 31st March 2026.

Covid-19 had a major impact on both the volume and the complexity of the evidence the Valuation Office Agency received when it came to setting current rateable values.

The agency’s surveyors did work closely with pubs investigating both local and national markets to understand how they were impacted by the pandemic taking account of the impact Covid-19 had on trade and profitability.

Deeply concerned 

As a result, pubs saw their combined rateable values fall overall by £247.16m down from £1.48bn to £1.23bn under the 2023 revaluation, a 17% reduction. 

The antecedent valuation date also reflects in law the economic position as at that date and, in short, on 1st April 2021, we were still in a very uncertain world.

The UK had formally left the European Union and, in early 2021, a third “wave” of the pandemic was sweeping across Europe with additional lockdowns.

UK scientists were also warning of such here and 17% just didn’t go far enough. The tax base needs correction for bills to be adjusted accordingly. 

The industry is deeply concerned right now with the current level of business rates being paid and the Labour party’s manifesto accepted an undue burden has been placed on our high street businesses. 

Pubs currently face the prospect of an inflationary rise to the business rates multipliers of 1.7% and the loss 75% rates relief next April in England for the 2025/26 financial year without intervention from the Chancellor on 30 October at her autumn Budget.

But what about the artificially high bills being paid right now and ever since 1 April 2023? 

An immediate correction now would solve some of that concern at no cost to the Treasury as losses on appeal are factored in when setting multipliers - an element of self-insurance if you like. 

"Pubs are going to see huge increases in rateable value at the next revaluation in 2026 and that will impact bills between 1 April 2026 and 31 March 2029"

However, in the longer term far greater pain is set to come. The 2026 revaluation, the very first under a shorter 3-year cycle, will have an antecedent valuation date of 1 April 2024.

Just consider the factors that determine ‘fair maintainable turnover’ and how they will have dramatically changed from 2021 to 2024.

The reality is pubs are going to see huge increases in rateable value at the next revaluation in 2026 and that will impact bills between 1 April 2026 and 31 March 2029.

The next revaluation is mandated in law and the Valuation Office Agency are now channelling their resources into preparing new draft valuations at a cost expected to be in the region of £80m.

While the Labour Party have promised to reform the current business rates system saying an improved system would still raise the same revenue but in a “fairer way”, as things stand, pubs will still be valued in exactly the same way using ‘fair maintainable turnover’. New valuations are being prepared on that basis right now.

This method of valuation is also used for hotels, petrol stations, cinemas, bingo halls, stadiums, theatres, tourist attractions and the like.

Tens of thousands of more properties, the length and breadth of England and Wales, all expected to see huge increases in business rates in 2026 too for the following three financial years. 

Difficult period 

Surely now is the time to pause to improve the current business rates system, to make it fairer in these types of circumstances.

This would also allow the Valuation Office Agency the opportunity to focus their attention solely on ensuring both the 2017 and 2023 tax bases are corrected, and ratepayers have received their tax rebates having then been given the certainty their bills have been set fairly before receiving the next ones under another revaluation cycle.

Hundreds of millions of pounds still from 2017 and billions from 2023 need to be remitted back to business across all sectors of the economy so that they can invest and grow whilst knowing they are not paying any more than they should be. 

Current rateable values require a rapid and significant review, through the urgent resolution of outstanding challenges to ensure ratepayers are paying the correct level of tax now rather than incorrectly high bills.

Analysis by my firm suggests these values are more widely over assessed than in any previous list, because of the impact of Covid-19 which made it such a difficult period to value within. 

The priority of this Government seems clear - to help support greater investment and drive economic growth – and this could be achieved, in part, through those rebates being returned more rapidly, allowing businesses the ability to invest and grow.