High street firms facing extra £1bn tax bill next month as relief slashed
Shops, restaurants and pubs across England are facing an extra £1bn in taxes when a discount is cut next month, adding to a “tsunami” of rising costs hurtling toward the sector, according to new analysis.
Businesses in London will be hit hardest by changes, tax and software firm Ryan found.
Firms in the retail, leisure and hospitality sector are facing increased costs in April when a discount on business rates will be reduced from 75 per cent to 40 per cent.
The changes were announced in last year’s autumn budget, with the government committing to keeping the discount scheme for the next financial year but cutting the level of relief.
Each business will still have a maximum discount of £110,000.
Ryan’s analysis found that the reduced discount will raise an extra £1.03bn from firms across England over the 2025-2026 tax year.
Nearly a third of the extra revenue will come from businesses in London, who collectively are facing an additional £309.7m in business rates.
This is followed by an extra £157.9m from businesses in the South East who are facing a bigger bill, and £110.5m from firms in the North West.
Alex Probyn, a property tax expert at Ryan, told the PA news agency that it “comes on top of a tsunami of other rising costs, making it a complex and challenging environment” for businesses to operate in.
From April, national insurance contributions will also rise for some businesses, while they will also have to pay employees a higher national living wage.
The government has said extra revenues raised from higher taxes on businesses will help fill a gap in the UK’s public finances and be plugged into things like infrastructure and the public sector.
It pledged in the budget to introduce permanently lower business rates for smaller retail, hospitality and leisure firms from 2026.
The government has also said that some 865,000 employers will not pay any national insurance in the year ahead because of the employment allowance rising from £5,000 to £10,500.
But Probyn said the changes will “disproportionately affect small and independent businesses across sectors already struggling”.
Average business rates retail, leisure and hospitality are set to jump by 140 per cent over the coming tax year.
For the average shop, this means bills will spiral from about £3,589 to £8,613 for 2025-2026.
By Anna Wise, PA Business Reporter