Effects of the Autumn Statement 2023 and Spring Budget 2024 on business rates in England

Updating the small business rates multiplier

The Chancellor announced at the Autumn Statement 2023 that the Government would freeze the small business multiplier at 49.9p while uprating the standard multiplier by September’s CPI rate of inflation.

2024/25 Multipliers:

• Non-domestic rating multiplier 54.6p (0.546)

• Small business non-domestic rating multiplier 49.9p (0.499)

219,410 shops, pubs, restaurants, offices, factories as well as public sector buildings in England will now face a business rates tax hike of £1.66 billion on 1st April for the 2024/25 financial year, of which £570.45 million will be shouldered in the Capital and £306.22 million by the retail sector.

Firms in England will now be paying £7.4 billion a year more in business rates than in 2010. The 6.7% increase, at an effective tax rate of 54.6%, will mean that in April firms paying the higher rate will face the biggest year-on-year increase to the standard multiplier since 1991 despite the UK’s headline rate of inflation set to fall below the target rate of 2% within the coming months. This increase may be seen as a substantial obstacle to continued investment and economic growth, especially after two consecutive quarters of contracting GDP. The Local Government Finance Act 1988 (Prescription of Non-Domestic Rating Multipliers) (England) Regulations 2023 continues and extends existing Government policy, which dictates that properties with a rateable value below £51,000 are to be charged the lower small business multiplier. This instrument continues that policy and applies it to properties occupied by charities and unoccupied properties which are eligible for the small business multiplier.

Business rates (with respect to properties in England that are below £51,000 rateable value) should therefore be calculated by reference to the small business multiplier.

New film studios business rates relief

At the Spring Budget 2024, the Chancellor announced that in order to promote investment in new studio space and ensure that the UK continues to be a world leader in producing film and high-end TV, the Government will introduce a 40% relief on gross business rates bills for eligible film studios in England until 2034.

The relief will be implemented as soon as possible, and bills will be backdated to 1st April 2024. This is a tax cut worth around £470 million over the next 10 years. Studios will remain eligible for the improvement relief, and English Local Authorities will be fully compensated for the loss of income as a result of this relief.

Extension of retail, hospitality and leisure relief

There will be an extension of the business rates relief scheme for retail, hospitality, and leisure properties, worth an estimated £2.4 billion in 2024/25.

The 2024/25 retail, hospitality, and leisure business rates relief scheme will continue to provide eligible, occupied, retail, hospitality, and leisure properties with a 75% relief, up to a cash cap limit of £110,000 per business.

The Government expects local authorities to provide details of the relief to eligible ratepayers for 2024/25 in their bills for the beginning of the 2024/25 billing cycle.

Empty property relief

The empty property relief “reset period” will be extended from six weeks to thirteen weeks from 1 April 2024 in England. This is set to raise £40 Million annually from 2024/25. The Government will also consult on a “General Anti-Avoidance Rule” for business rates in England, and has published at Spring Budget a summary of responses to the Business Rates Avoidance and Evasion Consultation.

Parliament brought about the 2008 regulations for a number of reasons, one of which was to force landlords to let their properties in a more flexible manner, including short term lettings, which informed the six-week reset period.

Given the post-pandemic shift in how commercial property is now used, it doesn’t seem like the right time to disincentivise short-term lettings. Vacancy rates for certain asset classes remain above pre-pandemic levels, and there has been a general downturn in values brought about by higher interest rates.

Improvement relief

The improvement relief scheme will support businesses wishing to invest in their property by ensuring that no ratepayer will face higher business rates bills for 12 months as a result of qualifying improvements to a property they occupy. This scheme will now run from 1st April 2024 to 31st March 2029.

While the freeze on the small business multiplier and new rate relief initiatives may alleviate some pressures, the significant tax hike for many firms raises concerns about its impact on investment and growth, particularly in this challenging macroeconomic environment. With ongoing consultations and adaptations, the business rates landscape continues to evolve, presenting both challenges and opportunities for stakeholders across various sectors. As businesses navigate these changes, leveraging expert advice becomes paramount to ensure accurate assessments and mitigate financial burdens effectively.