High Street Firms Anticipate £1 Billion Tax Increase Amid Business Rates Adjustment
The reduction in business rates relief is expected to impose significant financial burdens on retail and hospitality sectors across England.
Shops, restaurants, and pubs throughout England are preparing for an additional £1 billion in taxes as changes to business rates relief come into effect next month.
This adjustment will see a reduction in the current discount from 75% to 40%, adding to the already mounting costs faced by the sector.
Tax and software firm Ryan has conducted an analysis revealing the implications of this policy shift.
The changes were initially detailed in last year’s autumn Budget, where the Government pledged to maintain the discount scheme for the upcoming financial year, albeit at a lower level of relief.
Under the revised structure, businesses will still be eligible for a maximum discount capped at £110,000.
According to Ryan’s analysis, the cut in discount is projected to generate an extra £1.03 billion from businesses across England during the 2025-2026 tax year.
Of this additional revenue, close to a third, approximately £309.7 million, is expected to originate from businesses in London.
Following London, the South East is anticipated to see an increase of £157.9 million, while the North West is predicted to contribute an extra £110.5 million.
Alex Probyn, a property tax expert at Ryan, emphasized the compounded strain on businesses, noting that this tax increase is part of a broader array of rising operational costs that are creating a difficult environment for many enterprises.
From April, businesses will also face increased national insurance contributions and a rise in the national living wage for employees.
The Government has stated that the additional revenue generated from these increased business taxes will be allocated towards addressing gaps in the UK’s public finances, including infrastructure and public sector funding.
Furthermore, in the recent Budget, it was announced that beginning in 2026, there will be a permanent reduction in business rates for smaller retail, hospitality, and leisure firms.
In a positive note for some employers, the Government highlighted that approximately 865,000 businesses would not incur any national insurance costs in the coming year due to an increase in the employment allowance from £5,000 to £10,500.
Despite these measures, Mr. Probyn warned that the changes would have a disproportionate effect on small and independent businesses already facing challenges.
The average business rates for firms in retail, leisure, and hospitality are projected to increase by 140% in the upcoming tax year, resulting in average annual bills for shops soaring from about £3,589 to £8,613 for the 2025-2026 period.
This adjustment will see a reduction in the current discount from 75% to 40%, adding to the already mounting costs faced by the sector.
Tax and software firm Ryan has conducted an analysis revealing the implications of this policy shift.
The changes were initially detailed in last year’s autumn Budget, where the Government pledged to maintain the discount scheme for the upcoming financial year, albeit at a lower level of relief.
Under the revised structure, businesses will still be eligible for a maximum discount capped at £110,000.
According to Ryan’s analysis, the cut in discount is projected to generate an extra £1.03 billion from businesses across England during the 2025-2026 tax year.
Of this additional revenue, close to a third, approximately £309.7 million, is expected to originate from businesses in London.
Following London, the South East is anticipated to see an increase of £157.9 million, while the North West is predicted to contribute an extra £110.5 million.
Alex Probyn, a property tax expert at Ryan, emphasized the compounded strain on businesses, noting that this tax increase is part of a broader array of rising operational costs that are creating a difficult environment for many enterprises.
From April, businesses will also face increased national insurance contributions and a rise in the national living wage for employees.
The Government has stated that the additional revenue generated from these increased business taxes will be allocated towards addressing gaps in the UK’s public finances, including infrastructure and public sector funding.
Furthermore, in the recent Budget, it was announced that beginning in 2026, there will be a permanent reduction in business rates for smaller retail, hospitality, and leisure firms.
In a positive note for some employers, the Government highlighted that approximately 865,000 businesses would not incur any national insurance costs in the coming year due to an increase in the employment allowance from £5,000 to £10,500.
Despite these measures, Mr. Probyn warned that the changes would have a disproportionate effect on small and independent businesses already facing challenges.
The average business rates for firms in retail, leisure, and hospitality are projected to increase by 140% in the upcoming tax year, resulting in average annual bills for shops soaring from about £3,589 to £8,613 for the 2025-2026 period.
