Inflation could trigger a rise of almost £2bn in business rates from April 2024.
Analysts at Colliers International predict that the tax will rise from £26bn in 2023/24 to £27.7bn in the next financial year. Property intelligence firm, Altus Group, puts the increase a bit higher at £1.95bn.
Business rates will be recalculated in April using the government’s multiplier. This is typically linked to the consumer price index (CPI) from the previous September, which was confirmed yesterday (October 18) at 6.7 per cent.
The tax is affected by rateable value of business premises rather than being tied to earnings. This means that retail, hospitality and leisure businesses in busy high street areas will be disproportionately affected.
It has held steady at 51.2p for every pound in rateable value since April 2020, but it would rise 6.7 per cent to 54.6p in every pound if the multiplier is reinstated next year.
Not only does this inhibit businesses from investing in their own growth, it could see the closure of many SMEs altogether. Figures from The Insolvency Service show that registered company insolvencies are up 17 per cent in September compared to the same period last year.
John Webber, head of business rates at Colliers, said: “All sectors are suffering from increased costs, whether from increased energy bills, material or energy costs, whether from increased wage bills, materials or energy costs. They cannot cope with the hike in rates bills too.”
UKHospitality is calling on the government to freeze the business rates multiplier while maintaining the 75 per cent relief rates relief for retail, leisure and hospitality businesses. The organisation estimates that the inflation-linked rise will cost hospitality businesses an additional £234m. Combined with the estimated £630m that the ending of the current rates relief would bring about. The two together would leave hospitality facing an enormous £864m in business rate costs next April.
A Treasury spokesman said: “Whilst one third of businesses don’t pay business rates at all due to the government tax relief, we recognise the challenges the retail, hospitality and leisure sectors face, which is why we have slashed their bills by 75 per cent, protected them from rising energy costs and are keeping the duty on pints down through our Brexit pubs guarantee.”
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