September inflation signals business rate hike for 2021-22

Boris Johnson is being urged not to U-turn on another tax pledge by increasing business rates at the start of the next financial year.

Tax experts are warning that the Government could land firms with a £700 million rise in business rates in England next April unless it confirms changes to the property tax system, currently under a long-ranging review.

The Consumer Prices Index (CPI) measure of inflation by the Office for National Statistics (ONS) for September, which will be announced shortly, is used to determine rises in business rates for the next year. Rates levels have been frozen since the start of the pandemic, with the previous financial year seeing a business rates’ holiday for all retail and leisure operators.

However, property tax experts fear that business rates will be increased by inflation when the new financial year begins in April as the Treasury look to try and claw back tax revenue to set against the pandemic recovery. In July, the CPI reading showed inflation of 2% for the 12 months to July, but this is expected to reach three-year high, closer to 3%, after taking into account August’s data.

Some analysts are even more pessimistic with predictions inflation could rise further this year with 4% not considered outlandish.

If the April tax hike went ahead it would fly in the face of a manifesto commitment made by the Conservatives in 2019 stating that if they were re-elected it would lower the burden of business rates.

A 2% increase in business rates would signal that gross business rates bills next April for 2022/23 would rise by £667.81 million in England, of which £162.08 million would be met by the retail sector, according to the latest industry forecasts.

Business rates are devolved to Scotland, Wales and Northern Ireland which have all conducted their own reviews into the tax system.