Concern for British high street as sector set for four-fold tax rise in April
The double effect of inflation-linked tax bumps, as well as the end of business rate relief for consumer-facing firms, will lead to a four-fold tax increase for high street businesses next April, industry bodies have warned.
Industry leaders across the board have been increasingly vocal about the need for reform to business rate taxes, and have suggested the Chancellor should use the Autumn Budget to make impactful changes.
Around 250,000 high street premises are set for a 300 per cent rise in business rates, according to the commercial real estate intelligence firm Altus Group.
Part of this rise is because of an inflation-linked increase to business rates. While inflation was down in August – dropping below the Bank of England’s target for the first time in three years – it will still lead to a cumulative £140m increase in taxes.
The average shop will now see its business rates bill spiral from £3,589 to £14,599 next April, while the rate for pubs will increase from £3,938 to £16,020 and restaurants will see their average bill rising from £5,051 to £20,548, according to Altus’ analysis.
The second part of the equation is the end of rate relief for retail, hospitality and leisure firms.
Tax rates had been frozen for small businesses, while consumer-facing businesses were also eligible for a 75 per cent business rates discount up to a cash cap of £110,000. Just over 250,000 eligible properties – such as shops, pubs, cafes and hotels – currently receive that discount.
Altus has estimated the cost to high street businesses of ending the relief at £2.4bn.
Kris Hamer, Director of Insight of the British Retail Consortium, added that the “effect could be compounded if other business taxes are increased at the Budget”.
This may include employers national insurance, which the government hasn’t officially ruled.
“For too long, the gradual increases to business rates have been contributing to the decline of our high streets and town centres, damaging investment and preventing the creation of new shops and jobs,” Hamer added.
The tax bill eats up 55 per cent of the industry’s profit, the highest proportion of all main business sectors. Business rates make up 11 per cent of this, or 5.75 per cent of pre-tax profit.
Labour, for its part, has pledged to “level the playing field” for business rates, and revitalise the high street, but details of its policy aren’t expected until the Budget at the earliest.
A government spokesperson said: “We’re supporting businesses through pledges to cap corporation tax at 25 per cent, make the business rates system fairer, and to publish a business tax roadmap so that future investments can be planned with confidence.”
The controversy over business rates comes also amid warnings from the wider hospitality industry over the risk of “serious economic harm” from a potential beer garden smoking ban, and an industry-wide urge to cut the beer duty by five per cent.
The hospitality sector in the UK employs around three million people, making it the third largest employer in the country, and contributes about £93bn to the economy per year, according to UK Hospitality.