On 1st April 2017, Business Rates are set to change throughout England and Wales. The changes have received a huge amount of press - some positive, but mostly negative. So what does it mean for your business? Expert Market breaks down all you need to know...
What are business rates?
Business rates are a tax calculated by property price, business-type and other factors, such as the value of machinery/equipment. Currently the proceeds of business rates are split between the local authority and government evenly.
Why are they changing?
Business rates typically change every five years to accurately reflect the property market. The process is called 'revaluation' and is representative of property prices two years prior. The last change was in 2010, however because property prices had risen so much between 2008 and 2013, the government decided not to change rates 2015. 2017 has the (government) advantage of not being an election year, therefore it is considered a politically less risky time to change rates.
What will change
The new rates will take into account property prices from the 2015 revaluation process. Areas, such as Newport and Lowestoft will see a reduction in their business rates, whereas Southwold, London and the South-East are set to see hikes. Three quarters of businesses will either see no change or a reduction in their rates, with an estimated 600,000 small businesses set to pay no rates at all.
Why has there been more controversy surrounding this year's change?
Dubbed the biggest change to business rates in our generation, this change is set to affect one in four businesses negatively. The government's line is that they're cutting business rates by £6.7 billion, but thousands of businesses will be at risk from a massive rates-hike and a cut in rate relief.
London has been pinpointed as the area seeing the biggest changes. Many small/micro businesses across the capital are set to pay a whopping £17,000 more, Brixton rates are set to increase by around 100% and some central London retail venues will see a rise of over 400%. Experts fear that good businesses in thriving areas won't survive, whereas non-viable businesses in less thriving areas will succeed.
The business rates threshold ensures many small businesses don't pay rates, however those that do will be hit hard by changes. From shop-keepers to tech entrepreneurs, higher rates will be an unsustainable output for many. National Chair at the Federation of Small Businesses, Mike Cherry has labelled the rates 'out-dated' and urged the government to create "a simple, fair tax system for a modern economy."
The 2017 Budget - Business rate relief update
Following intense pressure from MPs, businesses and industry leaders - Phillip Hammond addressed the Business Rates change in his 2017 Budget, announced 8th March 2017. In the speech, Hammond laid out three schemes to help businesses that may suffer with an increase in rates:
1. Local Authorities will be given a discretionary fund of £300 million to help struggling businesses
2. An £1,000 'discount' for pubs with a rateable value of under £100,000 - this equates to around 90% of the England's pubs
3. Bill increases for businesses losing their small business rate relief will be capped at £50 per month
As well as addressing business rates, Hammond also offered a reduction in corporation tax (down to 19%).
Will the changes go ahead?
Despite the concerns and backlash, the changes will go ahead on April 1st, in a transitional phase. Because of the level of concern voiced by so many small businesses this year, Hammond has also pledged to reform future business rates revaluation processes.
How will your business be affected?
Find out exactly what rates you are/should be paying via the government's business rates page