Timeframe:
From April 2025 & 2026/27
Action points:
The current 75% discount on business rates is set to expire in April 2025, this will be replaced by a discount of 40% (maximum discount of £110k). In addition, there is a plan to introduce permanently lower business rates for high-street retail, hospitality and leisure properties from 2026-27.
Planning points:
If you are affected by the business rate increases here are some practical steps to plan ahead and soften the potential impact:
Review your budget and cash flow projections
- Update financial plans: Add the expected increase in business rates to your budget to avoid any surprises. Seeing the numbers up front helps you plan for the year and keeps your cash flow stable.
- Cash flow buffer: Set aside extra funds each month or quarter as a buffer, making it easier to cover any unexpected shortfalls due to the rate increase.
Check your rateable value and explore relief options
- Verify rateable value: Ensure your property’s rateable value is accurate. You can challenge it if you believe it’s too high, and any reduction could lower your bill.
- Small business rate relief: If your property has a low rateable value (below £15,000 in England), check if you qualify for Small Business Rate Relief, which can provide significant reductions or even a complete exemption.
- Rural and other reliefs: For businesses in rural areas or specific sectors, look into additional reliefs like Rural Rate Relief or Retail Discount to help cushion the impact.
Consider relocating or downsizing (if feasible)
- Evaluate your space needs: If you’re paying high rates for more space than you actually need, consider downsising. This might mean moving to a smaller premises or even exploring coworking options if possible.
- Location matters: Moving to an area with lower business rates could save significant amounts each year, though it requires a careful look at how this might affect your customers and team.
Offset costs with energy and efficiency savings
- Reduce overheads: Make energy efficiency a priority. Reducing electricity, water, and heating costs helps balance out increased rate expenses.
- Invest in technology: Automate processes or invest in software to streamline operations, reducing the need for large office spaces or extra hands. Technology might mean less reliance on high-cost physical spaces in the future.
Consider renegotiating with your landlord
- Negotiate lease terms: If you lease your property, consider talking to your landlord. You might be able to negotiate a temporary rent reduction or a lease break clause in case rates continue to climb.
- Lease adjustments: Some landlords are open to adjusting terms if business rate increases are putting pressure on tenants – especially if long-term retention is a priority for them.
Raise prices or offer premium services (strategically)
- Price adjustments: A slight price increase across products or services can help absorb rate hikes without hurting your customer base too much. Small, incremental increases are often easier for customers to accept.
- Premium offerings: Consider creating higher-value or premium service options to boost revenue. This can be as simple as offering a “premium” version of a current product with added benefits.
Get creative with shared spaces and subletting
- Share space with other businesses: If you have spare room, see if you can share with another business to reduce costs. For example, other small retailers or service providers might be looking for cost-effective ways to operate.
- Sublet excess space: If your lease permits, subletting part of your space can generate extra income to offset the rate increase.
Check out any grants and government support
- Local government support: Some local councils offer support to small businesses affected by rate increases, like grants or temporary relief schemes. Contact your local council to see if any initiatives apply to you.
- Sector specific support: Certain industries, like retail and hospitality, may have special grants or support programs to help with property-related expenses.
Review your business structure
- Operate from home (if applicable): For businesses that don’t rely on a physical storefront, consider remote or home-based work. This can lower or eliminate your business rates entirely.
- Virtual office options: If you don’t need a physical presence, consider virtual offices or flexible office solutions. You can maintain a business address while keeping rate costs low.
These steps will help you prepare for the increase and hopefully ease the impact on your business finances. It’s also worth keeping an eye on government announcements, as new relief programs or rate adjustments sometimes come into play for small businesses.