Legislation has today been introduced to allow government, for the first time, to permanently cut business rates for retail, hospitality and leisure properties.
- To fund this sustainably, the top one percent of high-value properties, such as large warehouses used by online giants will be asked to pay more to support the high-street.
- 865,000 employers will not pay National Insurance next year as Employment Allowance increase set to become law.
Draft legislation has today been published to, for the first time, permanently cut business rates for retail hospitality and leisure properties from 2026.
High streets across the UK will benefit from business rates for retail, hospitality and leisure properties being permanently cut for the first time from 2026, following the introduction of legislation in Parliament today.
This begins the delivery of the government's promise to reform business rates and help the high street.
The tax cut will be funded by a tax rise for the very largest business properties, such as online sales warehouses.
Until then, 250,000 retail, hospitality and leisure (RHL) properties will receive 40% relief off their business rates bills up to £110,000 per business to help smooth the transition to the new system. This support is alongside the Budget announcement to freeze the small business multiplier, together with Small Business Rates Relief protecting over a million properties from inflationary increases. Taken together, this is a package worth over £1.6 billion in 2025-26.
To further support retailers, the government is today also introducing legislation to increase the Employment Allowance from £5000 to £10,500, meaning 865,000 employers will not pay employer national insurance next year.
James Murray, Exchequer Secretary to the Treasury, said:
For too long the business rates system has been working against our high streets.
Today is a major step towards our new system that will support retail, hospitality and leisure businesses on our high streets to succeed.
This Bill paves the way for a permanent cut to their tax rate, helping to level the playing field between them and online and out-of-town businesses.
The government today is also legislating to increase the Employment Allowance - a discount in National Insurance bills - from £5,000 to £10,500 from April 2025.
The increase to the Employment Allowance will mean that 865,000 employers will not pay any employer National Insurance next year, and 250,000 employers will pay less National Insurance than they are now.
It will allow firms to employ up to four National Living Wage workers full time without paying employer National Insurance on their wages.
The eligibility of the allowance will also be expanded to include all eligible employers, rather than just those with a wage bill of less that £100,000 a year.
Craig Beaumont, Federation of Small Businesses Executive Director, said:
We are pleased to see James Murray and the whole Treasury team take this important step forward today - legislating for the significant increase to the Employment Allowance which FSB strongly championed, to protect smaller businesses with employment costs. But also taking a decisive step forward on business rates reform.
For far too long, permanent business rates reform has been put into the too difficult box. It is extremely encouraging on rates to see Ministers standing up for small firms in retail and hospitality and taking long-term action necessary to the future of our high streets - we look forward to continuing to work in partnership with the new Government to make sure no small businesses whatsoever are blocked from achieving their ambitions by a rates system that has not simply not kept pace with the needs of a modern economy.
This follows important action announced by the Business Secretary to tackle the scourge of late payments and to take forward an Industrial Strategy to unblock the supply side barriers holding small firms back from their full potential.
To calculate a property's business rates bill, the rateable value of a property is multiplied by the relevant multiplier (tax rate).
Today's Non-Domestic Rating (Multipliers and Private Schools) Bill means that new permanently lower multipliers for RHL properties can be introduced from 2026. This permanent tax cut will ensure that they benefit from much-needed certainty and support.
This will help the government achieve its goal for a fairer business rates system that protects the high-street and supports investment - one that is fit for the 21st century.
With public services crumbling and a £22 billion fiscal hole to address, ministers have been clear that the new RHL tax rates must be sustainably funded.
This will be achieved by a higher tax rate for the top 1% most valuable properties - those with a rateable value of at least £500,000. Large distribution warehouses, including those used by online giants, will help fund the high street tax cut.
Until 2026, 250,000 RHL premises will see 40% relief off their bills next year up to a cash cap of £110,000 per business.
The new RHL tax rates will provide meaningful support to RHL businesses of all sizes in recognition of the role RHL chains play in attracting footfall to the high-street. A discussion paper has also been published to engage with businesses over the next six months on how to further reform the system outside of retail, hospitality and leisure.
Sebastian James, former CEO of Boots and Dixons Carphone, said:
It is very welcome to see the Government take steps to rebalance the heavy business rates load on bricks and mortar retail and hospitality as businesses, both large and small, in this vital sector seek to mitigate cost pressures in order that our high streets up and down the country can flourish as the centres of their communities.
The National Insurance Contributions Bill which will increase the Employer Allowance, also increases National Insurance for businesses to invest in public services, including to help fund the NHS by an extra £22.6 billion over two years compared to 2023/24, as well as other measures to avoid austerity. This will support the NHS to deliver its First Step on its Health Mission of 40,000 extra elective appointments a week and make progress towards the commitment that patients should expect to wait no longer than 18 weeks from referral to treatment.
