Chancellor Rachel Reeves’s first Budget delivered some harsh news for businesses but offered some hope for high street retailers by committing to a rebalancing of the business rates system over time.
From April 2025, the National Living Wage will increase by 6.7% from £11.44 to £12.21 per hour, with the National Minimum Wage (18-20 rate) to rise by £1.40 per hour to £10 – the largest increase on record.
Employers’ National Insurance contributions are to rise from 13.8% to 15% from April 2025, with the threshold for employers’ contributions falling to £5,000 per year. However, the Employment Allowance for small businesses will rise to £10,500 a year. Fuel duty has been frozen, meaning the 5p cut previously implemented will be extended for another year.
On business rates, the Chancellor committed to “create a fairer business rates system that protects the high street, supports investment, and is fit for the 21st century” over the course of the parliament.
The government has pledged to introduce permanently lower tax rates for retail, hospitality and leisure properties with rateable values under £500,000 from 2026-27.
The biggest cut will apply to properties currently paying the small business multiplier, ie those with a rateable value less than £51,000. Retail properties currently paying the standard multiplier, with a rateable value between £500,000 and £51,000, will also benefit from a permanently lower multiplier.
The government will bring forward primary legislation to amend the Local Government Finance Act 1988 to enable the government to introduce lower multipliers for retail properties, funded by higher multiplier for properties with rateable values of £500,000 and above, a measure which captures the majority of large distribution warehouses, including those used by online giants, the government maintained.
The level of multipliers will be set at Autumn Budget 2025, following the outcomes of the revaluation for 2026.
During the interim period, for 2025-26, retail businesses will receive a 40% relief on their business rates up to a cash cap of £110,000 per business. The small business multiplier will also be frozen in 2025-26.
