According to the Office for National Statistics (ONS), the Consumer Prices Index (CPI) rose by 6.7% in the 12 months to September 2023, the same rate as in August.
The CPI, a key measure of inflation in the UK, can significantly impact business rates as the Government uses it to calculate the maximum annual increase in the Uniform Business Rates (UBR) multipliers. The UBR for 2023/24 was frozen at 2022/23 levels in response to the ongoing impact of the COVID-19 pandemic and the cost of living crisis.
However, we now await clarification from the Chancellor as to whether the UBRs in England will once again be frozen for 2024/25, or if ratepayers will need to absorb an increase of up to 6.7% in their business rates liabilities.
If not frozen, for those with large properties in England, the UBRs would shift from 51.2p to 54.5p. Setting the multiplier is devolved in Wales and Scotland, but the freeze in recent years has been nationwide. A CPI-geared increase for Welsh properties would see the UBR increasing from 53.5p to 57.1p, and in Scotland, a large property would be facing a new UBR of 55.7p.
Those in leisure, hospitality and retail in England and Wales could face a further increase, with a 75% rates relief package worth up to £110,000 per business scheduled to come to an end next year too.
To prepare for the potential impact of the CPI announcement, businesses should start planning early. Businesses should review current rates and assess how a potential increase in the UBRs could affect them.
Budget estimates and accruals should be updated for the entire property portfolio for better visibility of medium- and longer-term impacts on financial forecasts.
Businesses should also consider ways to reduce their business rates, such as applying for relief or challenging their rateable value where possible.
By taking proactive steps, businesses can work to minimise the potential impact of any CPI-geared increases on their ongoing liabilities.
Talk to one of our team about how we can help.