Budget disappoints sector

The hospitality sector was disappointed by Business Rate reforms, with news of a potential tourist tax greeted warily, following today's Budget.

Reeves confirmed that mayors would be given the powers to raise overnight levies. Secretary of State for Housing, Communities and Local Government Steve Reed said: "Tourists travel from near and far to visit England’s brilliant cities and regions.  We’re giving our mayors powers to harness this and put more money into local priorities, so they can keep driving growth and investing in these communities for years to come."

Commenting on plans for Business Rates, John Webber Head of Business Rates at Colliers said: “The Chancellor’s announcements today concerning business rates constitute a dismal day for UK PLC and the High Street. Together with rises anticipated in the 2026 Revaluation, matters have been made even more costly for businesses, who overall will be facing higher business rates bills next April as business rates set to rise from £33.6 billion to £37.1 billion- a 10.2% increase.

This is despite pre-election promises of business rates reform and “saving the high street.”

The Chancellor announced today:

• The abolition of the 40% business rates relief for the retail/leisure (RHL) sector (which had been capped at £110,000 per business) from next April. This will now be zero.

  
  

• Its new multiplier policy with the introduction of five new business rates multipliers set at the following levels:

• Small business RHL multiplier -RV below £51,000 (RHL): 38.2p

• Standard RHL multiplier RV between £51,000 and £499,999 (RHL): 43p

• National small business multiplier RV below £51,000 (non RHL): 43.2p

• National standard multiplier RV between £51,000 and £499,999 (non RHL): 48p

• High value multiplier RV £500,000 and above (all properties) 50.8p

• The introduction of a 1p supplement to the relevant tax rate for ratepayers who do not receive Transitional Relief or the Supporting Small Business Scheme to partially fund Transitional Relief. This will apply for one year from 1 April 2026.

The government stated that the reason for the lowest multiplier for the smaller retail, hospitality and leisure (RHL) properties is to compensate them from the loss of their RHL reliefs and to put support for the “high street” on a permanent footing. However, the funding for this reduction is to be achieved by increasing the multiplier for larger properties—those with RVs of £500,000 and above—across all sectors, including retail, hospitality and leisure.

The government said that over 750,000 properties will be due to benefit from the RHL multipliers and just over 21,000 properties would be in scope for the higher multiplier on 1 April 2026. It did admit however that because property values are generally higher in London and the South East, most of the properties in scope of the higher multiplier will be in these areas- see table below.

The government also said that the RHL and high-value multipliers form part of a wider business rates package worth £4.3bn over the next three years to support businesses which would include:

• A redesigned transitional relief scheme that caps bill increases, worth £3.2 billion which provides more generous support for larger properties, including airports, hotels and key Industrial Strategy properties.

• A supporting small business scheme capping bill increases for the smallest businesses losing some or all of their small business rates relief or rural rate relief worth over £500 million. The government has expanded this scheme to ratepayers losing RHL relief to offer further support worth an additional £1.3 billion as RHL properties transition to permanently lower tax rates.

• Extending the period that properties eligible for Small Business Rates Relief retain relief on their first property from 1 year to 3 years after acquiring a second property.

Webber said: “Whilst we are pleased to see that the cap on support for RHL operators has now been removed (previously £110,000 per business) we are concerned that the discount on the smaller multiplier is only 5p which is limited and may not offset the loss of reliefs these smaller shops and restaurants received previously, particularly if their RV rise as anticipated in the 2026 Revaluation”

"We are also disappointed that the government has continued with its plan that the funding for this reduction will be achieved by increasing the multiplier for larger properties—those with RVs of £500,000 and above—across all sectors. This will impact offices, large industrial and manufacturing units and larger retail sites among others- putting millions on their bills. This policy is also an attack on London and the Southeast. By its own admission, of the 21,000 properties paying the higher multiplier-10,700 are in London and the Southeast.

"The government has also said that its policy is to target the large distribution warehouses, yet of the 21,000 businesses facing the higher multiplier only 1900 are distribution warehouses and a fraction are online retailers.

“By this action the government has effectively shifted the cost of this support from itself to UK plc, putting an even further strain on businesses across the board- and putting even further pressure on the high street since it is the big retail and leisure operators who provide anchor tenants, encourage footfall and create the jobs. Tesco, Asda and Sainsburys all have at least 90% of the properties in the higher multiplier range.

"Such increased costs are effectively a stealth tax and will only lead to food inflation. It will do nothing to stimulate investment and expansion.”

"Far from reducing business rates they are on the way up.”

Webber adds, “ The government’s new multiplier policy has also made a complicated system even more complicated. As well as the five new multipliers we still have additional multipliers for the City of London and supplements for a number of BIDS. Analysing business rates will not be as straight forward as previously, costing time and money– the “uniform” business rate (UBR) seems to have disappeared forever.”

He concluded, “Listening to the Chancellor today has done little to allay my concerns for businesses in the difficult economic period ahead. The government’s business rates “reforms” are merely tinkering around the edges and will provide limited benefit- merely making the system more complicated. Proper longer term business rates reform or a concerted effort to reduce the multiplier to 35p in the £, something that everyone can afford,  seems to have gone out of the window.

"As we await the draft list for the 2026 Revaluation also published today – one in which we expect to see RVs rise across the board following post Covid rental growth, I am nervous as to how businesses will react.  Many have warned that increased business rates will impact jobs. Sadly, I don’t think the much-needed investment and growth plans will be on the agenda for many businesses for some time to come.”

Kate Nicholls, Chair of UKHospitality, said: “Bricks and mortar hospitality businesses are being taxed out, and they have been penalised by the broken business rates system for far too long.

“Today the Chancellor recognised the importance of hospitality and provided a permanently lower multiplier for hospitality businesses – reforms secured by UKHospitality.

“However, the 5p discount is only a quarter of the maximum 20p discount the Government proposed last year.This is particularly frustrating given changes to business rates valuations will mean that many hospitality businesses’ tax bills will still significantly rise, alongside increases to the minimum wage adding extra cost. Business tax rates for hospitality must continue to fall for the rest of this parliament.

“The Government has heeded our calls for significant transitional relief for businesses, which will mitigate the worst impacts of the revaluation.

“Hospitality remains under significant cost pressures, with the highest tax burden in the economy. We will continue to campaign for additional support for the sector, including further business rates discounts.”