Despite calls to scrap the business rates system altogether, Sunak has opted to reform the system rather than raise the £25bn it earns the Treasury annually in borrowing, increased taxation or reduced public services.
Property revaluations to occur every three years
The headline reform is a modernisation of the business rates system and the approach to property revaluations. From 2023, properties will be revalued every three years, which the Chancellor believes will make business rates “fairer and timelier for two million business properties”.
Relief to foster energy efficient investments in commercial properties
The Chancellor also outlined a new relief designed to support landlords and business making green investments in futureproofing the energy efficiency of their premises during the next five years.
Any additional plant or machinery used to generate renewable energy, such as solar panels and wind turbines, will be exempt from business rates in their entirety.
A new Business Rates Improvement Relief from 2023
Business organisations have been calling on the Chancellor to develop a mechanism that enables the country’s commercial stock to be upgraded and overhauled, without penalising those investing.
The new Business Rates Improvement Relief enables any business to make improvements to their property, without paying a penny more in additional business rates for the first 12 months. This relief will be active from 2023 onwards.
No increase in the business rate multiplier in 2022
The proposed increase to the business rates multiplier for next year has been scrapped by the Chancellor. This covers both the standard and small business multipliers and ensures businesses will pay no more than their property’s rateable value, multiplied by the current multiplier (before any relief is deducted).
Mr Sunak confirmed this equates to a saving of £4.6 billion for small businesses during the next five years.
Business rates relief extended to 2023
The Chancellor has also moved to extend all business rates relief. The reliefs, including small business rate relief, rural rate relief and charitable rate relief, were due to close in 2022. However, these have since been extended until 2023. Mr Sunak says this extension will also save small businesses an additional £30 million combined.
Retail, Leisure and Hospitality sectors receive 50% business rates discount
The hardest hit areas of the economy during the Covid-19 pandemic were the retail, leisure and hospitality sectors. The Chancellor has subsequently announced a new 50% business rates discount for businesses in these sectors for another 12 months. This is just weeks after the end of the 100% business rates holiday.
Mr. Sunak said that any eligible business, ranging from pubs and music venues through to hotels and cinemas can claim a 50% discount on their business rates “up to a maximum of £110,000”.
When paired with the small business rate relief, the Chancellor says these combined measures will result in over 90% of retail, leisure and hospitality firms seeing a business rates discount of at least 50%.
Grants for the devolved administrations will be adjusted in the usual way using The Barnett formula, a mechanism used by the Treasury in the United Kingdom to automatically adjust the amounts of public expenditure allocated to Northern Ireland, Scotland and Wales to reflect changes in spending levels allocated to public services.
Date published 27 Oct 2021 | Last updated 27 Oct 2021