Thousands of neighbourhood shops, pubs, cafés and hair salons stand to be freed from business rates altogether under tax changes expected in the budget later this month, a shift that could ease pressure on the small businesses that anchor everyday life on England’s high streets.
The measure, to be set out by Chancellor John Healey at the budget on October 28, would raise the threshold at which small companies begin paying business rates from £12,000 to £18,000. Andy Burnham is expected to honour a promise made over the summer to make that change, having vowed during his successful by-election campaign in Markerfield to lift the threshold and to phase out the relief gradually between £18,000 and £21,000.
For the people who run and use these businesses, the stakes are practical and immediate. An analysis by the tax firm Ryan estimates that 75,000 properties will be lifted out of paying business rates, including 39,000 shops, 2,600 pubs, 2,500 restaurants, 2,000 hairdressers and beauty salons, 1,600 cafés, and 1,600 village halls and scout huts. The benefit is aimed at smaller independent companies in the retail, hospitality and leisure sector, the kind of enterprises that residents encounter daily. Only firms in England will be affected, because the policy area is devolved.
The relief is expected to be permanent rather than temporary, and is likely to take effect from the start of the new tax year in April 2027, though some uncertainty remains over the timing. The figures refer to rateable value, the estimate of a commercial property’s annual market rental value, which is how business rates are levied. It is expected that these specific threshold changes will be announced in the budget, although slightly different figures could still be chosen.
The estimated cost to the Treasury, put at about £460m annually by Ryan, is expected to be funded by tax rises on online retail giants. That framing places the burden on large digital retailers rather than on the local businesses the policy is designed to support.
Meanwhile, Burnham and Healey are expected to present the change as part of their drive to offer “breathing room” to people and businesses. Alongside it, the budget is set to include a delay to the 6p fuel duty rise coming in the New Year, and new financial support for households to soften the impact of the increase in the energy price cap in January. Both measures speak directly to household budgets at a time when energy bills are set to climb.
Alex Probyn, practice leader of property tax at Ryan, welcomed the direction but raised a caution about how the relief will be financed. “Increasing Small Business Rates Relief (SBRR) would be hugely welcome news for thousands of smaller businesses on our high streets, so I hope the government provide this for a valuable sector of our economy, but the question remains; will this relief have to be paid for elsewhere?” he said. That question matters to the wider public, since any offsetting tax rises will shape who ultimately bears the cost.
The chancellor has repeatedly signalled in public that he wants to help with “business costs” and has urged officials to find ways to support the high street. He has also been pushing in recent weeks for new defence announcements of some form in the budget, though details are being closely guarded. Last week, Healey said: “I want the budget to be a budget that gives Britain a bit of breathing space, but also reinforces the strength of our fiscal plans and the strength of our resilience and our economy for the future.” Further coverage of the budget’s direction can be found at https://www.thetimes.com/uk/politics/article/nh18-x85f8btbw.
The fiscal backdrop is difficult. Public finances have been worsening, in part because the US-Iran conflict has pushed up inflation and a global bond sell-off has raised the price of debt repayments. That has left the chancellor needing to raise money through tax rises, having signalled that he will not substantially increase borrowing or damage the fiscal rules set by his predecessor, Rachel Reeves. Even so, both Healey and Burnham want to protect the upbeat message of the Burnham premiership so far, which explains the presence of small giveaways in the package.
By contrast, a separate development has exposed splits over whether to build a third runway at Heathrow. Healey has talked up its potential to boost economic growth, while Burnham is uncertain about the value of the project, a disagreement with implications for infrastructure decisions that affect travellers and communities alike.
A Treasury spokesman declined to comment on budget speculation. For the owners of the pubs, salons and shops counted in Ryan’s analysis, and for the neighbourhoods they serve, the confirmation will come only when the chancellor stands up on October 28.