Small businesses across Britain’s high streets are facing a sharp escalation in business rates bills over the next three years prompting warnings that shops, cafés and hospitality venues could be forced to shrink or close without government intervention.
New analysis from the Federation of Small Businesses (FSB) shows that firms in retail, hospitality and leisure (RHL) face an average 52% increase in business rates, phased in over three years from April.
Around 230,000 small businesses in England will be hit as existing relief is cut and other changes to the rating system take effect.
The increase reflects the combined impact of the removal of a 40% RHL discount, the revaluation of premises, and changes to the rates calculation formula.
SOARING RATES
FSB policy experts say the cumulative effect would leave many firms paying thousands of pounds more despite already facing higher employment and energy costs.
By way of example, the FSB said a small shop whose rateable value rises from £16,000 to £19,104 would see its annual business rates bill climb from £4,790.40 in 2025/26 to £7,297.73 by 2028/29.
Although the government has allowed itself scope to reduce the business rates multiplier by up to 20p for small RHL firms, ministers are currently applying a reduction of just 5p. According to the FSB, applying the full reduction would broadly restore relief to previous levels.
ON THE BRINK
Tina McKenzie, policy chair at the FSB, says: “Striving small businesses in retail, hospitality and leisure – from bakeries and coffee shops to garden centres, gyms and dry cleaners – are on the brink unless Chancellor makes a decisive intervention now.
“Ahead of the last Budget, the Chancellor led 230,000 small businesses in retail, hospitality and leisure to believe that something akin to their current 40 per cent rates relief would be brought in permanently.
“The reality is the relief will be only a fraction of that, and only a quarter of the potential relief the Government has at its disposal. That needs to change, with the full relief allowance being deployed.
“The tax timebomb will see three years of soaring bills.”
“The tax timebomb that’s currently ticking will see three years of soaring bills, threatening our high streets and the jobs and services they provide.
“Combined with other cost pressures going up in April as well, the Chancellor has to be realistic that without action on business rates relief, the burden will become too much to bear for some, who will either shrink or close down altogether.”
RAISE THE THRESHOLD
The FSB is also calling on ministers to raise the threshold at which business rates apply from a frozen £12,000 rateable value to £25,000, which it says would lift thousands of small firms out of the system altogether.
Victoria Dunthorne, owner of Victoria’s Cheese, a cheese and wine shop in Ely, Cambridgeshire, says a recent revaluation has pushed her beyond the threshold for Small Business Rates Relief while also removing the RHL discount.
She adds: “It’s already making me shrink the offering that I give to my customers. I’m heading into year two and I’m not thinking about expanding my hours, increasing my hours.
“I’m thinking about shrinking them so that my other costs don’t grow as well. Because if you’ve got this standing start cost before you’ve even got any revenue in, then you’re going to be nervous about trying to expand and put extra hours in.
“For businesses like mine the next biggest cost is staffing. So that’s where you’re going to try and recoup some of this extra cost that the Government wants in business rates.”
Her annual rates bill is expected to rise from £3,500 to £5,800.
