Business Rate Changes at a Glance

By smei

Posted 22/03/17

Chancellor Philip Hammond responded to “concerns raised by colleagues and businesses”[1] about the planned changes to business rates, due to take effect next month, in his Spring Budget announced on Wednesday 8 March 2017.

As well as committing to explore a reform to the revaluation process, an approach which he commented would be consulted on in “due course”, the Chancellor also announced that three new measures would be introduced ahead of the next revaluation in April 2017.[2]

These measures comprise the introduction of a cap so small businesses losing their rate relief will pay no more than £50 per month; that pubs with a Rateable Value of less that £100,000 will receive a discount of £1,000; and finally, local authorities will be provided with a fund of £300 million to allocate discretionary relief to target hard cases in local areas.

The announced measures follow claims from some critics, including shadow business secretary, Rebecca Long-Bailey, that many small businesses may be faced with “very sharp” increases in business rates when the revaluation takes place next month.[3] But, what do the changes mean for your business? We’ve compiled some of the key facts to help you navigate the situation.

What are business rates?

Business rates are taxes on commercial properties based on the “rateable value” of the property. Rateable values are based on the site’s rental value which is determined by the Valuation Office Agency[4]. Rental value takes property prices in the local area and multiplies them by the shop’s size and then by a government multiplier which is set annually.[5]

Business rates are typically reviewed every five years. However, the government delayed the latest revaluation from 2015 to 2017 to avoid “sharp changes” in rates due to the shifts in property values since 2008, though this plan may have backfired. The changes may result in some businesses seeing dramatic changes in their rates as high value areas may face large increases, while less prosperous areas may see decreases.[6]

What are the main concerns for small businesses?

The changes in rates are almost completely outside of the control of business owners. It is likely that the areas of the UK which will be impacted most will be London and the South East where property prices have increased significantly since 2008. However, other parts of the country, such at South Wales and Yorkshire, are likely to experience a decrease in the rates they pay.[7]

Critics have claimed that the rate changes will favour large businesses and online retailers that do not have the bricks and mortar stores. Big businesses may also have warehouses which are located in out-of-town areas which have reduced in value or increased at a lower rate than smaller outlets in town centres.[8]

Concerns have also arisen over the increase of the National Living Wage, which will rise from £7.20 an hour to £7.50 an hour from April,[9] the same independent businesses that may be impacted by business rate changes could also be faced with extra staffing costs.

This could potentially be bad news for the high street too as while larger businesses with branches around the UK will be able to offset their rate changes, independent high street staples like hairdressers, florists, and clothing shops in flourishing areas may not be able to do the same.

Rates increases ultimately leave businesses asking two questions: Can costs be passed on to customers and how can businesses remain competitive?

Is help available?

Local government secretary, Sajid Javid is exploring ways to respond to the problem and has examined proposals for a £150 million fund to give relief to those small businesses at risk of higher rates, while Chancellor Philip Hammond committed to finding a better way of taxing digital businesses as part of his Spring Budget reform. However, plans will remain unclear until the consultation process commences.[10]

To cushion the impact felt by businesses, the government has also announced measures to help with the transition. Caps will be introduced and the rise in bills will be gradually phased in. As well as this, properties worth £12,000 and below will receive 100% tax relief and those worth between £12,000 and £15,000 will benefit from smaller levels of relief.[11]

David Gauke, chief secretary to the Treasury, insists that the majority of businesses will see no change in their rates: “The fact is that the generous reliefs we are introducing mean that 600,000 small businesses are paying no business rates at all – something we’re making permanent so they never pay these bills again.”

However, experts in business rates, Gerald Eve, believe the government’s figures don’t take into account inflation or appeals adjustments.[12]

How could my business be affected?

The changes may mean that, overall, high street retailers will need to find an estimated extra £125 million to pay increased rates. This works out at an average of £3,663 more for the average small shop.[13] To put that figure into context, on average, florists may need to provide arrangements for an extra five weddings a year to meet the increase.[14]

There are also exclusions to the changes. Agricultural land and religious buildings are exempt from the rates, and charities and sports clubs will receive up to 80% relief. Similarly, businesses in the countryside with a local population of below 3,000 can apply for 50-100% off their rates.[15]

To calculate how much your business rates may increase by, have a look at The Telegraph’s useful tool here, which displays both the government’s projections and independent expert opinion.[16]

It will be interesting to see the Chancellor’s proposed revaluation reform and what impact the measures announced in yesterday’s Budget have on the conversations about rates, as well as what this will mean for small businesses. Watch this space for more updates in due course.


The information contained herein is based on sources we believe reliable and should be understood to be general risk management and insurance information only. The information is not intended to be taken as advice with respect to any individual situation and cannot be relied upon as such.

Statements concerning legal, tax or accounting matters should be understood to be general observations based solely on our experience as insurance brokers and risk consultants and should not be relied upon as legal, tax or accounting advice, which we are not authorised to provide.


















Posted 22/03/17

Author: smei

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