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Autumn Budget delivers damaging business rates blow

Expectations from businesses on the UK high street were high following the promises made in the Labour manifesto to overhaul the outdated business rates system to create an ‘even playing field’ for them with their online counterparts

November 20, 2024

Expectations from businesses on the UK high street were high following the promises made in the Labour manifesto to overhaul the outdated business rates system to create an ‘even playing field’ for them with their online counterparts.

Together with a letter from the British Retail Consortium signed by 71 CEOs which called for the introduction of a Retail Rates Corrector to decrease business rates by 20%, you could be forgiven for thinking that significant change might be on the business rates horizon.

However, we were all left feeling a little disappointed by Chancellor Rachel Reeves’ first Budget, which was not only light on business rates change, but will actually have a harmful impact on our already ailing high streets.

One month on from the Budget, our business rates experts look again at what was announced in the Budget on business rates and what impact will it have on UK businesses. Adam Barnfield, Head of Business Rates at Vail Williams, explores.

Drop in Retail, Hospitality and Leisure (RHL) Relief for 2025/26

Disappointingly, the government announced in the Budget that business rates relief for eligible occupied retail, hospitality and leisure properties will fall to 40% (from 75%) up to a cap of £110,000 from April 2025.

Not only is this a far cry from the rates cut many were hoping for, it will be significantly difficult for retail and hospitality companies, some of which are still feeling the legacy of Covid and the cost-of-living crisis. Indeed, many could see their rates effectively double next year.

Change to Multipliers (Small Business and Standard) for 2025/26

The small business multiplier (the number that is multiplied by a property’s rateable value to calculate the business rates bill) is to be frozen in England for a fifth consecutive year at 49.9p.

Whilst this freeze for small businesses was broadly welcomed, the changes to the multiplier for businesses with high value properties will come as a shock.

From April 2025, an increased Multiplier will be applied to the ‘most valuable’ properties, and although it is not yet currently clear what this rate will be or how many businesses this will apply to, the impact will be widely felt. The standard business multiplier for properties with assessments of RV £51,000 or more will be increased by 1.7% in-line with inflation to 55.5p.

Whilst the small and larger multipliers were confirmed in the Budget, we still don’t know about all the supplementary add-ons for the London Boroughs and this is providing some uncertainty when it comes to London-based businesses budgeting for their business rates liability next financial year.

Charitable Relief for Private Schools to be removed from April 2025

From April 2025, private schools in England will lose their charitable business rates relief, which gives them an 80% discount on their business rates liability.

Given many private schools benefitted from this mandatory relief, few would have been minded to ensure that their rateable values (RV) were correct through an up to date survey.

This means that there is a risk that any improvements made to their estates may not have been reflected in their RV and could result in an increase in business rates. Together with the fact that private schools will now be subjected to 20% VAT on their fees, this represents a significant challenge for private schools as they navigate the financial impact of this.

What changes can we expect to business rates in the future?

We, like many businesses, continue to call for complete reform of the outdated and complicated business rates system and for permanently lower retail, hospitality and leisure (RHL) properties.

From 2026/27, there are plans to introduce permanently lower multipliers for properties with a rateable value under £500,000 from 2026/27. Meanwhile, there will be a higher multiplier on properties with an RV of £500,000 and above. This will encompass most large distribution warehouses including those used by online giants.

Revaluation 2026 is on the horizon

Business owners will also need to be aware of the next Revaluation, which in line with the shortening of the revaluation period, will be in 2026. Ahead of this, it is important to ensure that you have an up to date survey and valuation of your property to ensure that that information held by the VOA on your premises is up to date.

Rollout of Duty to Notify

In line with the above, you should also be aware that the rollout of the new Duty to Notify will begin from April 2026 and be formally activated and mandated for all by 1 April 2029.

This will require all owners / occupiers of rateable premises to proactively notify the Valuation Office Agency (VOA) of any changes or improvements made to their premises which might affect its rateable value.

Changes to Check Challenge Appeal

There are plans to change the Check Challenge Appeal (CCA) system to remove ‘Check’ as a separate process and shorten the ‘Challenge’ timeline for the 2029 rating lists.

The aim is to streamline the process on the basis that the VOA should have accurate and timely property information in place which avoids the requirement for the ‘Check’ process. However, experience tells us that the information held by the VOA is not always correct, so removal of this element of the process could have undesirable consequences – both for occupiers and the VOA.

Tackling avoidance and evasion

Finally, businesses will also need to be aware of the potential prospect of a further tightening of business rates avoidance and evasion measures and we will monitor for changes in due course.

Whilst the changes announced in the 2024 Budget were not the comprehensive overhaul we had expected, their impact will be felt no less.

For help and support with the potential impact of the latest changes to business rates on your rating liability, our business rates advisers can help.

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