Chancellor John Healey today raised the threshold for small business rate relief for retail, hospitality and leisure businesses from £12,000 to £18,000, a change he said would take 70,000 more businesses out of business rates altogether.
Healey told MPs in his first Budget that the move meant half of the country’s shops, restaurants and gyms would pay no business rates at all. Other businesses in those sectors will have their rates frozen in real terms “so that none face an above inflation rise for the next two years”.
Under the current rules on gov.uk, full relief applies to a single property with a rateable value of £12,000 or less, tapering to nothing at £15,000.
The change adds to the 20 per cent cut in business rates for pubs, clubs and music venues from April 2027, which the government announced in its first week.
“Since day one, I’ve said that I’ll be a chancellor who champions the small British firms that give character to our communities,” Healey said. “The bakeries, the cafes, the hair salons.”
How the relief will be paid for
Healey said the support would be funded by raising Machine Games Duty on higher-stakes machines from 20 per cent to 25 per cent, while protecting pubs and seaside arcades. Adult gaming centres and vape shops will be carved out of business rates reliefs, and the business rates Transitional Relief Supplement will be extended for another two years.
He also said he would strengthen requirements on online marketplaces “so that sellers cannot avoid paying VAT when they sell online”. Around 2,000 small brewers and cider makers will share £10m of alcohol duty relief, and tariffs will be suspended on more than 100 supermarket products.
On devolution, Healey committed to 100 per cent of business rates being retained locally by the end of the decade, with 20 per cent of business rates revenue going to mayors from 2027. From 2028, mayors and other strategic authorities will also have powers to introduce an overnight visitors levy.
The announcement follows figures published yesterday showing a record 738,144 UK businesses in financial distress.
Reaction
Gemma Gathercole, strategic engagement lead at ACCA UK, said: “Business in the retail, hospitality and leisure sectors will welcome the increased threshold for small business rate relief. These labour-intensive sectors have been significantly impacted by employment and minimum wage increases, so this will provide some relief. However, ACCA would welcome a review of the business rates system in the longer term to ensure that it fits the modern economy.”
Warren Abbey, chief executive of 365 Finance, said: “Business rates don’t account for difficult trading conditions, a quiet month, a difficult winter or a period of weak consumer spending do not make the bill any smaller.”
Lucy Mangan, partner and head of tax services at Menzies, said that “as relief usually covers only one property, a chain of ten small units will still be charged on every one of its premises, often beside a competitor paying nothing.”
On the marketplace changes, which ACCA said are due to be introduced in October 2027, Glenn Collins, head of technical and strategic engagement at ACCA UK, said: “The plans are not good for small businesses. Rules aimed at dealing with a minority of problematic businesses will have an adverse impact on the majority.”
Andrew Thurston, customs duty senior manager at MHA, said of the tariff suspension: “Many goods already enter the UK duty-free under free trade agreements or preferential arrangements, and a reduction in import duty does not automatically translate into lower prices at the checkout.”
