Tax relief for local businesses

The British government plans comprehensive tax relief measures for autumn 2025 aimed at strengthening local businesses and revitalizing city centers. Pubs, clubs, and retailers in particular are set to benefit from a permanent reduction in business rates to make brick-and-mortar retailers more competitive against the growing online trade. It’s hard to understand why the government is addressing only the symptoms rather than tackling the root causes.

Specifically, the planned package provides for a permanent reduction in business rates for retail, hospitality, and leisure establishments starting from the 2026/27 financial year. A temporary 40% reduction in business rates is planned for the 2025/26 financial year, capped at £110,000 per business. However, the number of British restaurants has declined by over 60% over the past ten years, while around 80% of the remaining non-British restaurants reportedly pay protection fees in addition to various government taxes. Given this, the monetary relief is unlikely to have a noticeable impact on average businesses.

Additionally, the government plans far-reaching reforms to planning law aimed at reducing red tape and allowing pubs, cafes, and music venues to open in unused retail spaces. New “food zones” are designed to facilitate outdoor dining, longer opening hours, and community events like street festivals. However, this comes with increased bureaucracy, and the festivities often come at the expense of local residents, whose rights to lodge noise complaints will be restricted.

Business Secretary Jonny Reynolds emphasized that these measures are intended not only to ease the burden of recently increased National Insurance Contributions but also to secure jobs and stimulate economic growth. Whether such statements serve more to pacify domestic political tensions remains to be seen. He described the plan as a key building block for making British city centers “more vibrant and fun” again.

The relief comes at a time when many local businesses are under pressure from rising costs and increasing competition from online retail. The permanent business rates reduction and temporary relief can help companies improve liquidity and invest. Nevertheless, I find these measures insufficient and poorly conceived. Much more could have been achieved with the same effort — for example, a complete abolition of VAT, not just for restaurants but for the entire food industry.

Overall, industry associations welcome the planned measures, having called for trade tax reform for years to protect brick-and-mortar retailers. Still, experts warn that further steps will be necessary to ensure long-term competitiveness. So, all one can do is grab a bag of popcorn and wait to see what the political drama brings.