Retail, hospitality, and leisure will get “much-needed certainty and support” thanks to a higher tax on the most valuable 1% of business properties, according to exchequer secretary to the treasury James Murray.
Increasing business rates from 2026 for the biggest properties will enable a permanent reduction in the tax for smaller operators that “make up the backbone of our high streets”. In doing so it will “help make sure online giants pay a fairer share”, Murray argues in an opinion piece for The Grocer today.
Plans to tax the biggest firms more from 2026 to pay for lower rates for smaller operators were set out in a business rates discussion paper published by the government alongside the budget on 30 October. It proposed the higher rate would be payable by businesses occupying property with a rateable value over £500,000.
The budget also slashed business rates relief for retail, hospitality and leisure from 75% to 40%, effective for a year from April 2025.
Last Wednesday, the government introduced draft legislation to the Commons to enable the planned introduction of permanently lower rates for high street businesses from 2026, saying it would be “funded by a tax rise for the very largest business properties, such as online sales warehouses”.
Business rates and real estate experts have already argued in response to the government’s discussion paper that large bricks and mortar retailers – including major supermarkets – will be hit with the higher tax along with online giants.
“As well as impacting on the distribution and warehouse sector, this will also impact the larger businesses in the retail,” Colliers head of business rates John Webber said in response to the discussion paper.
“So, the bigger businesses, the ones that actually create the jobs, will be hit for six.”
Murray argues in his opinion piece that other out-of-town large businesses besides online giants also “draw footfall away from high streets”.
Read more: The government has shown its hand on business rates – and retail has been cheated
He said: “Legislation introduced to the Commons last Wednesday will enable us to introduce a new, permanent tax cut for retail, hospitality, and leisure properties that make up the backbone of our high streets.
“This cut will be sustainably funded, not by increasing taxes on working people, but through a higher tax rate on the most valuable 1% of business properties in the country.
“This will capture the majority of large distribution warehouses, including those used by online giants, as well as other out-of-town businesses that draw footfall away from high streets.
“This not only shifts the tax burden away from the high street, but will help make sure online giants pay a fairer share.”
He added: “Our new, lower tax rates, which are sustainably funded, will provide retail, hospitality, and leisure businesses with much-needed certainty and support. They will protect high streets and the public finances, whilst giving businesses stable foundations on which to grow.”
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