Reduction in business rate discounts - Strategies for cost-saving measures in business operations
The government has announced the Non-Domestic Rating Bill, a new measure aimed at reforming the way business rates are calculated for certain sectors. This potential change could result in reduced rates for certain businesses, particularly those in the leisure, hospitality, and retail sectors [1]. However, the reform falls short of Labour's manifesto commitment to abolish business rates altogether.
Currently, business rates are a property tax based on the rateable value of commercial properties. The ongoing reforms are set to increase business rates for Britain’s biggest retailers, with some properties seeing rises of around 30%, translating into a significant cost surge [1]. Critics argue that these changes increase operating costs for many businesses at a time when cost inflation is already high [2].
In response, the Labour Party has promised a comprehensive overhaul of the business rates system, aiming to make it more modern and fair, particularly to support sectors like retail, hospitality, and leisure. The party’s reforms are intended to replace the existing property tax framework with one that better supports businesses and jobs, rather than penalizing them [2].
Small businesses can currently escape business rates by claiming small-business rate relief, applicable to firms using only a single property with a rateable value of less than £15,000. If the rateable value is below £12,000, there are typically no business rates to pay at all [1].
The Labour Party's proposed overhaul seeks to reduce the punitive nature of business rates, recognizing the vital role sectors like pubs play in communities and local economies. The party emphasizes practical and meaningful reforms that would support jobs and economic activity rather than increase financial strain on businesses [2].
A comparison between the current system and Labour's proposed overhaul reveals that the Labour Party aims to modernize the tax basis, potentially revising it or providing reliefs to support business viability [2]. The party also aims to relieve pressure on pubs and hospitality, providing fairness and supporting jobs [2]. Furthermore, Labour's focus is on fairness and practical support to help businesses thrive, reversing punitive trends [2].
Business groups have called for a new system that is much more flexible and cuts the burden of property taxes. Retail, hospitality, and leisure sectors are currently receiving more support than other businesses, as they don't receive relief on factories, or on office or warehouse accommodation [1]. Business-rate reliefs will come to an end entirely in April 2026, resulting in another big rise in costs for retail, hospitality, and leisure firms unless other help is announced [1].
Many charities are eligible for business rates relief of up to 80%. Eligible firms will still be getting more support than was available prior to the pandemic [1]. The average restaurant's business rates bill will rise from £5,051 to £12,122 next April [1]. For shops, the typical business rates bill will climb from £3,589 to £8,613 next April [1].
The transitional relief scheme means that if your business property has been rerated under the recent revaluation scheme, there are caps on how much extra you can be asked to pay each year [1].
In conclusion, Labour’s overhaul would contrast with the current approach by reducing the burden on vulnerable businesses, potentially restructuring the rates system to reflect modern economic realities, and reversing the recent hikes and cap removals that have increased costs for many companies [1][2]. The goal is to foster a business-friendly climate that supports jobs and community livelihoods rather than simply raising government revenue through property taxes.
- In response to the rising costs faced by businesses due to the current property tax system, the Labour Party proposes a revamp of the business rates system to offer personal-finance relief, aiming to promote fairness and support job creation.
- The Labour Party's proposed changes in the business rates system focus on modernizing the tax basis, providing reliefs to support businesses, especially those in the leisure, hospitality, and retail sectors, and reducing the overall financial strain these sectors face, thereby fostering growth and profitability.
