UK high streets are facing the risk of being severely hit by a "tax time bomb"—a policy leading to a potential 52% surge in business rates for shops and cafes.
The Federation of Small Businesses (FSB) has warned that since the Chancellor announced the gradual phasing out of COVID-19 tax reliefs and the revaluation of business rates last year, millions of small businesses in the retail and service sectors could face "years of difficulty."
Rachel Reeves indicated that she is formulating a support package specifically for the pub industry, which is set to be heavily impacted when the new rates take effect this April.
However, major business groups point out that pub jobs account for only one-seventh of total service sector employment, and they are urging the government to broaden the scope of its business rates relief scheme.
Tina McKenzie of the FSB warned that thousands of small high street businesses are already on the "brink of collapse," with some forced to cut jobs just to survive.
Sources reveal that Downing Street is still formulating a support plan for businesses across all sectors, suggesting that related relief measures are likely to be announced just before the Spring Statement on March 3rd—only weeks before the new rates come into force.
Nevertheless, other business leaders fear that any relief measures may be "too narrow in scope and insufficient in scale," and potentially focused solely on the pub industry.
McKenzie stressed that further tax relief is urgently needed: "Small and micro businesses in retail, hospitality, and leisure are struggling desperately—from bakeries and cafes to garden centres, gyms, and dry cleaners. Unless the Chancellor takes decisive intervention immediately, these businesses will face collapse."
She pointed out that the business rates revaluation cycle will lead to continued increases in these property taxes over the next three years, describing it as a "ticking tax time bomb."
McKenzie stated that without further rate relief, "some businesses will be overwhelmed, forced to either scale back their operations or shut down completely."
The FSB said that with the removal of a 40% rates discount for 230,000 businesses, coupled with increased rateable values for premises and changes to the multiplier calculation, the tax burden for many small businesses will increase by thousands of pounds.
The federation is urging the government to fully utilize support measures for small businesses by reducing the business rates multiplier by 20 pence, rather than just 5 pence, thereby restoring the relief to its previous level.
According to FSB calculations, for a small shop whose rateable value increases from £16,000 to £19,104, its business rates bill is projected to soar from around £4,800 to nearly £7,300 by the 2028-2029 financial year.
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