Inflation rate signals £1bn business rates hike in England next year

The Office for National Statistics revealed on Wednesday that Consumer Price Index inflation was 3.1% in September.

Henry Saker-Clark
Wednesday 20 October 2021 10:50
Continued high inflation means business rates for firms in England could rise by around £1bn next year (Victoria Jones/PA)
Continued high inflation means business rates for firms in England could rise by around £1bn next year (Victoria Jones/PA)

Continued high inflation last month has signalled that business rates for firms in England could rise by around £1 billion next April.

The Office for National Statistics revealed on Wednesday that Consumer Price Index inflation was 3.1% in September, dipping from 3.2% in the previous month.

The September inflation reading is used by the Government to determine the increase to business rates, the property tax affecting UK businesses.

According to real estate advisers at Altus Group, the latest 3.1% reading signals an increase of £1.04 billion for businesses across England.

Clients tell us that the rates burden act as a disincentive to invest

Robert Hayton, Altus Group

The rise in the tax rate is due to start in the new financial year on April 1.

Retail, hospitality and leisure operators have benefited from a business rates holiday since the start of the pandemic, meaning they have not had to pay their usual bills.

However, the holiday has been phased back in recent months and will be removed entirely by the start of the new financial year.

Retail stores, which have been hit hard by the pandemic and the shift towards online, are expected to shoulder more than £251 million in extra payments.

Industry experts have called on the Treasury to overhaul business rates in next week’s Autumn Budget following a review into the tax regime, although reports last week suggested that appeals for widescale reform will be rejected.

Robert Hayton, UK president of Altus, said the firm’s “clients tell us that the rates burden act as a disincentive to invest”.

He added: “The Chancellor must use the Budget to set stringent targets for the clearance of tens of thousands of outstanding challenges to facilitate the return of years of overpayments whilst also ending the ridiculous policy of increasing upwards the tax rates by inflation which are now at an unsustainable level.”

An increase in the burden of tax will force more businesses to the wall, which will ultimately reduce the tax take

Jerry Schurder, Gerald Eve

Jerry Schurder, business rates policy lead at property consultants Gerald Eve, called for business rates to be frozen in the Budget to avoid large increases for firms.

He said: “We all know the country’s finances are in a parlous state after the pandemic, but an increase in the burden of tax will force more businesses to the wall, which will ultimately reduce the tax take.

“British business rates are already the highest tax of their type in the world and urgently need root-and-branch reform.

“The Government must stick to its manifesto commitment to reduce the burden of business rates and, as a minimum, must start by freezing business rates next year.”

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