Simply Business data has revealed the potential impact of the business rates rise to UK small businesses - with Milton Keynes and Reading set to be hit the hardest.
Our analysis shows that small businesses in the hardest-hit areas also have the least cash to spare, underlining the case for changes to the way business rates are calculated.
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Where will the business rates rise hit hardest?
Reading business rates
Business in Reading are set to be the worst hit, with projected rates rises of up to 70 per cent - the biggest increase for anywhere outside of London.
Following the business rates revaluation, businesses with a premises will be slapped with the huge rise, despite over a third of all businesses in the region turning over less than £50,000.
Milton Keynes business rates
Similarly, Milton Keynes is set to feel the impact of increased rates, with a projected rise of 60 per cent. Like Reading, over 30 per cent of premises-based businesses in the area have a turnover of less than £50,000.
Meanwhile, the proportion of premises-based businesses – including shops, restaurants, pubs, bars and clubs – within higher sales turnover brackets was smaller in Milton Keynes and Reading than in any UK city earmarked for large hikes in business rates (see table below).
|City||Projected rates rise (%)||Businesses with turnover <£50k (%)||Businesses with turnover >£50k (%)|
To highlight the potential impact on the likes of Reading and Milton Keynes, Cambridge and Croydon - in third and fourth place respectively - are expecting lower rates rises, despite having a higher proportion of businesses turning over more than £50,000.
Even in some regions expecting a decrease in business rates - including Exeter, Leeds, Birmingham, and Liverpool - the proportion of businesses earning over £50,000 is higher than Reading and Milton Keynes.
How are business rates calculated?
The skewed numbers are the result of the way business rates are calculated. Instead of looking at the success or profitability of a business, rates are set on property value.
More specifically, business rates are calculated based on a business premises’ ‘rateable value’ - essentially the open market rental value.
Business rates calculations ‘unfair’
However, many have called for a reform on the way rates are calculated.
Fiona McSwein, Chief Marketing Officer at Simply Business said: “In expensive areas, we would expect small businesses to have higher costs of business and higher turnover but the property price rises in some areas are a result of speculation rather than successful business growth.
“In Milton Keynes and Reading, small businesses have not yet felt the benefit of property developments, higher customer footfall, higher spending and greater earnings. They are still waiting for those benefits to come.
“With the rise in business rates, the cost of doing business should rise roughly in line with the increase in sales, as it does in Cambridge and Croydon. Instead, the growth in some areas of the country will face a huge setback. To base tax on property value rather than business turnover or profit is unfair.”
How will you be affected by the business rates rise? Let us know below.