Tax & admin · 26 February 2018

Chancellor urged to freeze business rates as owners see taxes rise above inflation

Business rates review
Local authorities will collect a total £24.8bn in business rates over the next year

Almost a quarter of a million business owners in England are set for a business rates increase ahead of the UK inflation rate, new figures have shown.

Business rates bills for the 2018/19 regime were distributed to owners last week, and new figures from real estate advisor Altus Group have revealed some 242,274 will see property taxes increase by over three per cent.

Experts have subsequently urged chancellor Philip Hammond to address the rise in the upcoming Spring Statement.

Above-inflation tax rises arrived despite the switch to a new business rates calculation, pegged to a lower rate than the previous indexation.

Impact of business rates
• £845m rise in bills between 2017 and 2018
• One owner a week facing prison over unpaid bills
• Two pubs demolished or converted each day of previous regime
• Six shop closures each day of previous regime

Initially scheduled for a 2020 introduction, Hammond used November’s Budget announcement to bring forward the consumer price index (CPI) for April 2018 calculations. Business rates will now rise annually in line with the CPI’s inflation index.

The CPI replaced the retail price index (RPI), criticised as “flawed” by the Office for National Statistics (ONS). Hammond claimed the switch would save firms £2.3bn over following three years, and the Federation of Small Businesses (FSB) said owners would see almost one per cent taken off business rates bills.

However, with transitional rate relief meaning a phased introduction of revaluation changes, over the next five years, one in eight business owners have seen their bills increase ahead of the CPI inflation rate.

Altus Group’s analysis of government data also revealed over 52,000 properties will see rates rise by over 20 per cent, while almost 10,000 will see increases of above 30 per cent.

In response to the findings, Alex Probyn, president of UK business rates at Altus Group, urged Hammond to halt further tax rises.

“The past few months have seen a stream of collapses across both the retail and hospitality sectors with many others teetering on the brink or considering large scales closures.”

“Historically, the spring is when chancellors have made key fiscal decisions so it’s not too late for a freeze in inflationary rises to help cushion the blow for those in transition amidst challenging trading conditions.”

Recent figures from the Ministry of Housing, Communities & Local Government (MHCLG) confirmed local authorities will collect £24.8bn in business rates over the next year – a £845m increase on the 2017/18 regime.

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Praseeda Nair is the editorial director of Business Advice, and its sister publication for growing businesses, Real Business. She's an impassioned advocate for women in leadership, and likes to profile business owners, advisors and experts in the field of entrepreneurship and management.