The government has helped soften the blow of April’s business rate revaluation with a £300m relief fund for local councils.
The announcement was made by chancellor Philip Hammond at today’s Spring Budget, in which he said business rates raise £25bn each year – all of which, by 2020, will be used to fund local government.
In addition, Hammond pledged no business losing small business rate relief will see their bill increase next year by more than £50 a month, while all pubs with a rateable value of less than £100,000 will get a £1,000 discount on business rate bills – equating to 90% of pubs.
Taken together, the government’s measures amount to a total £435m cut in business rates, targeted at “small businesses facing the biggest increases, protecting our pubs, and giving local authorities the resource to respond flexibly to local circumstances”, he said.
He added that business rates cannot be abolished, but admitted the government needs to find a better way of taxing the digital economy.
However, in the meantime he said there was scope to reform the revaluation process, making it smoother and more frequent, and to avoid the dramatic increases that the present system can deliver.
In response to the budget, Helen Dickinson, chief executive, of the BRC said the association agrees with the chancellor that the “world around us is changing quickly” and that a business tax system needs to be “fit for purpose” in the 21st Century.
“Any review needs to incorporate business tax in its entirety and not be constrained by the technicality of fiscal neutrality around business rates,” she said.
Speaking on the business rate relief measures, she said: “We hope that the relief measures will help some of those businesses hardest hit by the revaluation, albeit only temporarily.
“However, more short term relief measures continue to add complexity to an already impenetrable system. £435m is a drop in the ocean compared with the £25bn a year that the tax raises.
“This is yet another sticking plaster on a chronically ill patient – an unsustainable property tax higher here than anywhere in the developed world.”
Hammond also announced that self-employed workers will face a 2% increase in National Insurance contributions in 2018, while the allowance from Dividend Tax will be reduced from £5,000 to £2,000.