Chancellor John Healey is considering a package of business rates reforms aimed at cutting costs for thousands of small firms, as Labour prepares to put high street renewal and entrepreneurship at the centre of its first Budget.
According to a report in The Independent, Treasury officials are examining significant changes to England’s commercial property tax system ahead of the Budget on 28 October, including proposals that could remove thousands of independent shops, cafés and other small businesses from business rates altogether.
A central option under consideration is raising the threshold for Small Business Rates Relief, which has remained frozen at a rateable value of £12,000 for around a decade.
The Independent reports that increasing the threshold in line with inflation would take it to approximately £17,096, potentially taking thousands of small businesses out of business rates, while tapered relief could apply to properties valued up to £20,000.
Treasury examining help with sharp rates rises
The Chancellor is also reported to be considering changes to transitional relief for businesses hit by substantial increases following property revaluations.
Some commercial occupiers have faced increases of as much as 80%, while the existing transitional system limits how quickly bills can rise. The Treasury is examining whether those increases could be phased in over a longer period to give firms more time to adjust.
The proposals form part of a wider package aimed at reversing high street decline, with Treasury officials holding workshops with business groups over recent weeks to consider tax incentives and measures to support entrepreneurship.
Dogus: ‘Small businesses need breathing space to invest and grow’
Ibrahim Dogus, Chair of SME4Labour, welcomed the direction of the proposals and urged the Chancellor to use the Budget to give smaller businesses greater certainty.
Dogus said:
“Small businesses are the backbone of our high streets and local economies, but too many are operating under intense pressure from rising costs and high fixed overheads.
“If the Chancellor can take thousands of smaller businesses out of business rates altogether and protect others from sudden, unaffordable increases, that would give entrepreneurs valuable breathing space to invest, employ more people and grow.
“Labour is right to put thriving high streets and small businesses at the heart of its growth agenda. We want to see a Budget that backs enterprise, rewards investment and gives independent businesses the confidence to plan for the future.”
Kate Nicholls presses for wider hospitality support
The proposals have also been welcomed cautiously by the hospitality sector.
The Independent reports that UKHospitality chair Kate Nicholls has confirmed the industry has been in active discussions with ministers since January about rising operating costs and is urging the Treasury to extend targeted business rates support beyond pubs to restaurants, cafés and hotels.
That intervention comes after Downing Street committed to a targeted 20% business rates reduction for pubs, live music venues and night-time economy businesses, which is expected to save the average eligible venue around £1,100 a year from next April.
Hospitality businesses are now pressing ministers to ensure other parts of the sector are not left behind.
Burnham wants high streets to symbolise renewal
The wider plans build on Prime Minister Andy Burnham’s ambition to turn Britain’s high streets into what he has described as a symbol of national renewal.
The Independent reports that ministers are looking at business rates reform alongside measures to boost domestic procurement, entrepreneurship and investment in town centres.
Healey is expected to make reducing the cost of doing business one of the central themes of his first Budget on 28 October. No final decisions have yet been announced.
