UK on-trade business rates to jump 76% by 2028
The new business rates system in the UK could force many venues to pay more, despite the government’s claim that it would permanently lower rates.
In last week’s (26 November) Budget, chancellor Rachel Reeves claimed she was introducing a permanently lower tax rate for more than 750,000 retail, hospitality and leisure properties.
However, it has now been revealed that the business rates relief for hospitality, leisure and night-time venues, which was introduced during the pandemic, will be abolished from April 2026.
In 2020, these businesses received 100% relief, with support tapering from 2021. On-trade businesses currently receive a 40% relief.
Trade body UKHospitality claims the new system will see the average pub pay 15% more next year, totalling an extra £1,400. Over the next three years, it believes the average pub will pay an extra £12,900.
It added that by 2028/29, an average pub’s business rates will have increased by 76%, and an average hotel’s by 115%. In comparison, the rates bill for a distribution warehouse will have increased by 16%, an office building by 7%, and a large supermarket by 4%.
Kate Nicholls, chair of UKHospitality, said: “The government promised in its manifesto that it would level the playing field between the high street and online giants. The plan in the Budget to achieve this is quickly unravelling and will deliver the exact opposite.
“Our analysis shows that hospitality businesses will be paying more. Pubs will see bills increase by thousands and hotels by tens of thousands.
“We repeatedly warned the Treasury ahead of the Budget that hospitality would be uniquely impacted by significant increases to rateable values, due to the pandemic impacting previous valuations. This had to be factored into the level of business rates discount it offered the sector.
“The eye-watering increases pubs, hotels and other venues are now waking up to was exactly the reason why the Treasury had to implement the maximum possible discount. The decision not to do so will lead to higher bills next year.
“The government can solve this issue. I’m certain they did not intend to provide online giants, office blocks and out-of-town supermarkets with a better deal than local pubs, neighbourhood restaurants and coastal hotels.
“We agree with its reforms to deliver permanently lower business rates for hospitality and we appreciate the package of transitional relief, but its current proposal is not delivering lower bills. A 20p discount for hospitality would. We urge the chancellor to revisit.”
Night-time businesses
The Night-Time Industries Association (NTIA) also believes the system will force “many” venues to pay more.
It has calculated that a small bar with a rateable value of £25,000 (US$33,063) currently pays £7,200 per year; under the new system, its bill will rise to £9,550.
Meanwhile, a mid-sized late-night restaurant or bar (£60,000) will see its bill jump from £17,280 to £25,800.
Grassroots music venues or nightclubs with a rateable value of £100,000 will see bills rise from £28,800 to £43,000.
Large city-centre nightclubs (£300,000) will see £86,400 leap to £129,000, while ‘flagship’ venues with a rateable value of £650,000 will see rates jump from £187,200 to £330,200.
“These aren’t marginal increases – they’re closure-level numbers,” said CEO Michael Kill. “This reform has been presented as a permanent tax cut, but for most night-time venues, it is the exact opposite.
“The removal of 40% relief wipes out any benefit from reduced multipliers and leaves businesses worse off overnight.
“Inner-city nightclubs, music venues, and grassroots venues are on the frontline of this attack. With the late-night sector already contracting by 28%, the government is systematically shutting down the late-night economy.
“This is a hidden tax rise on jobs, culture, and city centre life.”
To mitigate the new system, the government has announced £4.3 billion in transitional support over three years, including £3.2bn Transitional Relief, £1.3bn Expanded Supporting Small Business Scheme, and a three-year extension on small business rates relief.
However, Kill said: “Transitional relief softens the landing – it doesn’t change where we land. And where many venues will land is closure.”
The NTIA is calling on the government to extend or replace the 40% relief beyond 2026 for night-time venues. It is also floating the idea of a specific multiplier to reflect the unique costs of operating after 9pm.
Other suggestions include specific protections for grassroots music venues from punitive rate hikes and a full impact assessment before implementing this reform.
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