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The Chancellor has been accused by the Conservatives of lying to the public over the financial black hole she said she needed to fill in the Budget as ITV News’ Political Editor Robert Peston explains
Publicans and hospitality chiefs have hit out at the government over its changes to business rates, with some saying their costs will rise by tens of thousands per year.
In the Budget, Rachel Reeves confirmed changes to how business rates – the tax affecting commercial properties – will be calculated, including a new multiplier from next year.
The chancellor also announced the phasing out of a Covid-era relief offered to businesses – a discount of 40% – from April.
Reeves pledged the lowest permanent business rates since 1991 for more than 750,000 retail, leisure and hospitality businesses, but experts argued the changes will result in a sharp annual increase in costs.
UKHospitality analysis has found the average pub’s business rates will increase 15% next year – an extra £1,400 – even with the reduced multiplier and when taking into account transitional relief.
One west London pub owner told ITV News his costs will increase from around £2,500 to more than £20,000 per year, while another said he will have to pay 92% more in business rates than last year.
However, there are exemptions for some small businesses as many receive different types of relief.
Sacha Lord, chairman of the Night Time Industries Association (NTIA), called the changes “catastrophic for the economy”, saying they will force business closures, cost people’s jobs and “crucify” the sector.
What was announced in the Budget?
Business rates are taxes charged on most non-domestic properties, like council taxes paid on homes.
They’re calculated by multiplying the rateable value of a property by a multiplier.
On Tuesday, the chancellor announced that the multiplier would decrease from 49p in the pound to 43p.
Rateable value changes
After the initial Budget announcement, the Treasury published new rateable values for properties, which will affect how much property tax businesses will pay from the next financial year.
Despite business rates going down, the rateable value of some properties will increase.
This means some business owners will be paying a smaller percentage on a higher value – thus, some will pay more than they did previously despite the multiplier decrease.
For example, a business currently paying 49% of £10,000 might find themselves paying 43% of £20,000 from April next year. That’s an extra £3,700 per year.
Phasing out of Covid relief
A third factor affecting business costs is the phasing out of financial support for businesses introduced during Covid and replaced with smaller support.
The government confirmed a current 40% discount for retail, hospitality and leisure businesses – which is capped at £110,000 per business – will end on March 31 next year.
However, the government insists a new £3.2 billion transitional relief scheme will provide support for businesses paying higher rates.
Reeves argued the reforms would make the system fairer and said the old rules, including “cliff-edges” in reliefs – where businesses lose support when expanding – were a disincentive to growth.
But analysis from tax firm Ryan indicated the change and an increase in rateable values for most pubs will result in a sharp annual increase.
It found the average pub will see a bill of £9,264.93 this financial year rise by 65.9% to £15,373.59 for 2026/27.
The analysis also indicated that restaurants will see their rates bills jump by 44.9% from April, while small shops will see a rise of around 42.3%.
‘It was a shock’
Peter Brew, landlord of The Black Dog Beer House, told ITV News it “was an absolute shock” when he calculated the new rateable value for his pub on the government website.
He said he is facing an increase of around £20,000 per year, which he called “crazy”.
“And that’s just one hike in our costs. Everything is increasing at the moment…. the market is very challenging,” he added.
Pub landlord Peter Brew said it is just one of many hikes in costs he is facing. Credit: ITV News
Talking about how this will affect his business, Mr Brew said: “It makes things a lot more difficult.
“You then have to think that wages are a huge cost, and that would mean maybe looking at our staff structure, maybe limiting the number of staff on shifts – and in turn that affects your offering to customers.”
Kate Nicholls, Chair of UKHospitality, said: “The government promised in its manifesto that it would level the playing field between the high street and online giants. The plan in the Budget to achieve this is quickly unravelling, and will deliver the exact opposite.
“Our analysis shows that hospitality businesses will be paying more. Pubs will see bills increase by thousands and hotels by tens of thousands.
“We repeatedly warned the Treasury ahead of the Budget that hospitality would be uniquely impacted by significant increases to rateable values, due to the pandemic impacting previous valuations. This had to be factored into the level of business rates discount it offered the sector.
“The eye-watering increases pubs, hotels and other venues are now waking up to was exactly the reason why the Treasury had to implement the maximum possible discount. The decision not to do so will lead to higher bills next year.
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