Delivering his first Budget today (Wednesday 28 October), Healey said the changes would support smaller retail, hospitality and leisure businesses, with around half of shops, restaurants and gyms no longer liable for business rates.
He also confirmed business rates bill increases for other qualifying businesses in the sector would be capped at CPI inflation for the next two years.
According to the Budget documents, an additional 3,500 pubs, 3,900 restaurants and 2,200 cafés will pay no business rates from April 2027.
The threshold for 100% relief will increase from £12,000 to £18,000 in rateable value, while the threshold for tapered relief will rise from £15,000 to £21,000.
Further support for pubs
The announcement follows Prime Minister Andy Burnham’s decision in July to cut business rates bills by 20% for pubs, social clubs and live music venues in England from April 2027.
The 20 percentage point increase will bring total business rates relief for qualifying pubs, social clubs and live music venues to 35% from April 2027, with the Treasury estimating an average saving of more than £3,000 per pub next year.
At the time, Burnham described the reduction as a “first step” and pledged to go further on business rates reform at the Budget.
The latest announcement delivers on his earlier proposal to increase the small business rates relief threshold to £18,000, offering further support to smaller operators.
Business rates to be retained locally
Healey also announced plans for 100% of business rates revenues to be retained by local and regional government by the end of the decade, as part of what he described as the “most radical act of devolution in a generation”.
From April 2027, mayors will receive a 20% share of locally retained business rates, with a share of income tax receipts also devolved from 2028.
The Chancellor said the changes would allow local leaders to reinvest more of the money raised by businesses in their areas.
He also confirmed mayors and other strategic authorities would be given powers to introduce an overnight visitors’ levy from 2028, which could have implications for pubs with accommodation.
Funding the relief
The measures will be partly funded by increasing Machine Games Duty from 20% to 25% on machines with stakes over £1 or prizes over £100 from April 2027.
However, the Government confirmed the existing rate would be maintained for lower-stake machines to protect pubs and seaside arcades.
The Chancellor also announced vape shops would lose eligibility for Small Business Rates Relief and retail, hospitality and leisure business rates multipliers, while adult gaming centres would lose eligibility for the latter.
The package will also be partly funded through tougher VAT enforcement for online marketplace sellers.
The measures come amid continued calls from the hospitality sector for wider tax reform, with operators warning business rates relief alone would not offset rising employment, energy and other operating costs.
Ahead of the Budget, JD Wetherspoon founder and chairman Sir Tim Martin warned operators against being ‘fooled by smoke and mirrors’, urging the sector to consider the combined impact of business rates, excise duty, employment costs and fruit machine duty.
