Businesses across the United Kingdom will need to find an additional £1.7 billion next year as rates bills are set to rise. This increase is in line with the latest inflation figures.
The situation is even more dire for companies in the leisure, hospitality, and retail sectors, as the current post-Covid support scheme is slated to end next year.
The State of Rates Bills
Rates bills contribute around £25 billion a year to the Treasury. Despite calls from businesses for large-scale reforms over several years, there have been few changes. The commercial property tax can increase each year, aligned with the Consumer Prices Index (CPI) measure of inflation for the preceding September. According to newly released data from the Office for National Statistics, the CPI has hit 6.7%. This means firms will have to find an extra £1.7 billion to cover rates bills from April next year.
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Calls for Government Intervention
Business leaders and rates experts are urging the Government to reconsider the planned increase. Simon Green, Head of Rates at Gerald Eve, said:
“If the Government were to introduce a 6.7% rise for every ratepayer, at a time when costs are already under enormous pressure, that risks causing further inflation as businesses will have no choice but to pass on the costs to customers.
“Clobbering high streets, retail parks, office blocks and logistics firms with these sky-high rises will also create a significant blow to the economic recovery that everyone wants to see.
“Those in leisure, hospitality and retail are potentially facing a double hit, with a 75% rates relief package worth up to £110,000 per business due to come to an end next year too.
“Chancellor Jeremy Hunt should announce at his budget next month – or even sooner – that the rise in line with inflation will be scrapped and until inflation is back to a more manageable level and to extend the rates relief support for the retail, hospitality and leisure sectors which continue to suffer. This will reassure businesses struggling with rising costs.”
Previous Freezes and Current Valuations
The Government has frozen the rates rise for the past three years due to the pandemic and the cost-of-living crisis. Each business pays the tax based on the rateable value of their property, which reflects rental levels set at a fixed valuation date—currently, 1st April 2021.
The Multiplier and Its Impact
Each year, the Government can increase the multiplier by a maximum of the CPI set in the preceding September. This means that a 6.7% increase will add £1.68 billion to bills from next year.
Retailers Raise Concerns
Last month, the bosses of several large UK retailers, including Tesco, Aldi, Ikea, Greggs, and M&S, wrote to Chancellor Jeremy Hunt. They warned that an inflation-linked rise in rates bills risks “severely undermining” the fight against inflation and could lead to higher prices in stores.