The UK Parliament is swiftly progressing the Non-Domestic Rating (Multipliers and Private Schools) Bill, which is introducing major changes to the business rates system.
The legislation, set to take effect from April 2025, aims to transform the business rates landscape by introducing differentiated multipliers and removing charitable rate relief for private schools.
Key Changes:
- New Multipliers: The Bill allows for the introduction of lower multipliers for retail, hospitality, and leisure (RHL) properties with rateable values below £500,000, while imposing higher rates on properties valued at £500,000 or above.
- RHL Relief: The existing 75% discount on RHL business rates will be replaced by a 40% relief in 2025-26, capped at £110,000 per business.
- Private Schools: The Bill removes eligibility for charitable rate relief from most private schools, with exceptions for those primarily serving students with special educational needs
Helen Dickinson OBE, CEO of the British Retail Consortium, welcomed the recognition that the current system disincentivises investment and emphasised the significant impact of business rates on retail and hospitality sectors compared to other industries. She said: “It is great to see the importance of retail, hospitality and leisure businesses…and to be thinking differently about the business rate system and how it applies to those businesses, because for many other industries, business rates are a tiny proportion of their cost base, whereas for retail and hospitality, it is a much more significant part of their costs.”
Tom Ironside, Director of Business and Regulation at the British Retail Consortium, highlighted potential unintended consequences of the new thresholds noting that businesses near the £500,000 threshold might face increased appeals and investment decision challenges due to the significant tax rate impact.
Other critics argue that the Bill represents a stealth increase in business rates for high streets and larger businesses. There are also concerns about the potential pressure on state schools due to the removal of charitable rate relief for private schools. UK economists, however, caution that business rates reform alone may not be sufficient to revitalise high streets, suggesting a more comprehensive approach is needed.
As the Bill progresses and with the April deadline now less two months away, industry leaders are still calling for further clarity in implementation and a broader review of the business rates system to ensure it aligns with the modern retail environment and supports business growth across various sectors.