The Government will base business rates increases on the CPI index rather than RPI two years earlier than planned, it revealed in today’s Budget.
Chancellor Philip Hammond said the change will now occur in April 2018 – a move that he said would save businesses £2.3bn over the next five years.
In a further boost to retailers, Hammond said that following the upcoming business rates revaluation, future valuations will take place every three years, rather than every five.
It means onerous business rates bills should not rise so sharply in the future.
The Chancellor also announced that 100% business rates retention will be trialled in London next year.
Hammond acknowledged that the tax “represents a high fixed cost” to businesses and insisted the Government had “listened to concerns” from business leaders ahead of this afternoon’s Budget.
“This relief will unleash investment that retailers want to direct towards the needs of their customers.”
Helen Dickinson, British Retail Consortium
It comes days after retailers including B&Q boss Christian Mazauric, Carpetright chief executive Wilf Walsh and Holland & Barrett supremo Peter Aldis called on Hammond to deliver “a shoppers’ Budget” and put a lid on “inexorable” rises in costs such as business rates.
British Retail Consortium chief executive Helen Dickinson said: “This relief will unleash investment that retailers want to direct towards the needs of their customers. This will be particularly critical at a time when shoppers’ disposable income is being squeezed further and the growth projections for the economy have been downgraded.
“Introducing three yearly revaluations is also a positive move to improve fairness of the system. These are encouraging first steps, so now is the time to commit once and for all to putting the rates system on a more affordable and sustainable footing, to support local communities, shops and jobs.”
Revo chief executive Ed Cooke added that, although the move to CPI was welcome, the business rates system was “still not fit for purpose for modern retail.”
Cooke said: “We encourage the Chancellor to look at the business rates system in its entirety as part of the review of digital economy taxation to ensure we protect our high streets and the built environment, thereby delivering on the promises in the Conservative manifesto.”
Consumer spending boost?
Hammond pledged to create “a prosperous and inclusive economy” and said the national living wage would increase from its current rate of £7.50 per hour to £7.83 in April.
The personal tax allowance will also rise from £11,500 to £11,850 next year, while the higher-rate threshold will be pushed up to £46,350 – moves that could spur consumer confidence and spending.
Home and DIY retailers could also be buoyed by the move to scrap stamp duty for first-time buyers up to a property value of £300,000, if the policy gets the housing market moving.
Those purchasing properties worth up to £500,000 will also not be charged stamp duty on the first £300,000.
To help deal with the “rapid technological change” taking place not just within the retail industry but across the UK, Hammond also pledged to invest more than £500m “in a range of initiatives from artificial intelligence to 5G and full-fibre broadband”.
A further £30m will be ploughed into digital skills distance learning courses.
Among the other policies announced today, the Chancellor revealed:
- £3bn fund to prepare the UK for Brexit
- An investigation into how a tax on single use plastics can reduce waste is interesting
- A freeze on beer duty but an increase in duty on high-strength white ciders
- A further £2.3bn for investment in research and development
- Support for electric cars including a £400m charging infrastructure fund
- £300m to connect HS2 with rail improvements in the North of England