Partner Content: Business Rates - What’s in store for businesses in April 2025?
Although we hoped Labour might fulfil its election manifesto – and introduce business rates reforms that would help to accelerate its “growth” agenda, so far we don’t appear to be going in the right direction, writes John Webber.
Schools
One of Labour’s first actions which will come into effect from April 2025 is to remove the eligibility for charitable rates relief for private schools. About half of the 2500 private schools in England have charitable status and have been eligible for mandatory charitable rate relief of 80 per cent. Local Authorities can provide up to 20 per cent further relief.
This removal will only bring in a small amount of money for the government –roughly £110 million a year- but could have a serious impact on the individual schools involved.
We estimate the change means around 1250 schools will face an increase on average of around £90,000 on their business rates. Some schools will face considerably more. On top of the imposition of VAT on fees in January, we estimate this could lead to a potential 30 per cent increase on fees from those schools from next September and for some parents (and schools) this won’t be sustainable.
This does look to be a case of bleeding the pips dry and disrupting education mid school year. We are working hard with a number of schools to effectively plan and manage their rates liability to make sure they don’t pay more in business rates than they have to.
Higher Multiplier and Removal of Reliefs
The Government’s decision in the Budget last October to freeze the smaller multiplier but allow the standard multiplier to increase with inflation from 54.6p to 55.5 p, means that most businesses will see a multiplier at nearer to 60p than 50p reflected in their April 2025 increased rates bills.
The Government also announced it would be cutting retail/hospitality/leisure reliefs from the current 75 per cent discount on business rates bills to 40 per cent from April 2025, with a full removal in April 2026. This will mean many businesses, currently eligible for this relief, will see their business rates bills rise by a massive 140 per cent in April this year and for some even higher.
We estimate those smaller retailers, currently benefitting from relief will see their bills increase on average from £3,751 to £9,003 this year and restaurants will see a rise on average from £5,563 to £13,351. Pubs, nightclubs and gyms will be similarly affected.
There will be a big shock in March when the new bills fall on the doormat. And, with no other support this year, this could cause some businesses to go to the wall, particularly as the rise comes on top of other Government measures such as the rise in the NMW and employer national insurance contributions, all of which will harm the R/H/L sector.
Lower Multipliers in 2026- for some
The Government does believe it is offering something to counter this loss of reliefs – with its plans to bring in lower multipliers for those businesses in the R/H/L sector with an RV of under £500 000 in April 2026.
New legislation to that effect is currently going through Parliament. However, it plans to pay for this by imposing a higher multiplier on all businesses with an RV above £500,000.
This again does not bode well for the high street as the higher limit will catch all of the main retailers who actually provide employment in the sector and may face a 20 per cent rise on their rates bills.
And the fact that there is a year between the loss of reliefs and the lower RHL multipliers being introduced seems to have escaped the Government’s notice! We worry about how many small businesses and jobs will be lost in the meantime.
April 2025 could therefore be a perfect storm - a headache for many businesses in terms of business rates, on top of the other pressures on them.
We are continuing to lobby the Government calling for proper reform and will be supporting our clients navigate this ever-complicated and onerous system.
John Webber is head of Business Rates at Colliers
