Businesses in the retail, hospitality and leisure sectors could benefit from reduced business rates next year.
Here’s all you need to know about UK business rates, why Mr Sunak introduced the tax relief package and reaction to the news.
What are business rates?
Business rates are government taxes imposed on businesses that use non-domestic properties such as shops, offices, warehouses, factories, pubs and holiday rental homes.
Local councils will issue business rates bills typically in February or March of each year for the following tax year. Queries can be made to local councils or the Valuation Office Agency (VOA).
There are relief packages available for businesses from local councils to reduce bills, which are not always automatic meaning businesses may need to apply to benefit.
Not all buildings are charged, for example farm buildings and places used for the welfare of disabled people, or using a bedroom at home as an office (temporary or permanent).
Business rates are devolved across the nations within the UK and are handled differently in Scotland and Northern Ireland to rates applied in England and Wales.
What changes has Rishi Sunak made in the Budget 2021?
Rishi Sunak’s Budget speech included a £7 billion tax relief package for small businesses, which consists of:
- cancellation of next year’s increase in the rates multiplier, which is forecast to save around £4.6 billion over the next four years; and a,
- 50% cut to next year’s business rates on most retail, hospitality and leisure properties up to the value of £110,000 per business
The package comes after a review into the business property tax and is said to benefit around 90% of businesses across the sectors.
This will come into effect after business rates reductions for firms in these sectors over the current financial year, following the rates holiday during the pandemic.
Mr Sunak said the new temporary relief rate will take place for 2022/23 and that rates revaluations will now take place every three years, replacing five-year gaps.
What did Rishi Sunak say in the House of Commons?
While addressing MPs, Rishi Sunak said: "I’m announcing today, for one year, a new 50% business rates discount for businesses in the retail, hospitality, and leisure sectors. Pubs, music venues, cinemas, restaurants, hotels, theatres, gyms."
Jace Tyrrell, chief executive of the New West End Company, representing firms across London’s West End, said: “It’s encouraging to see the Chancellor finally act upon the need to reform the business rates system.Cancelling the inflation-linked rise to the multiplier may ensure that rates won’t go up this year, but they are still too high.
“Reducing the time between revaluations to three years is welcome, as is the short-term relief for investment in improvements and sustainability, but this falls far short of a fundamental review.
“This simply doesn’t meet the Government’s manifesto commitment to reduce the burden of business rates on business.”
Robert Hayton, UK president at the real estate adviser Altus Group, described the measures as “a compelling basket of support which will aid the recovery”.
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