FSB says rates relief expansion could unlock small firm hiring

The Federation of Small Businesses is urging the Chancellor to expand business rates relief in England at the 28 October Budget, after 28% of small employers said a higher threshold would enable them to recruit.

The business group wants the Small Business Rates Relief threshold raised to £25,000. It estimates that the change would remove rates bills entirely for at least 250,000 additional small firms.

What happened

The research also found that 26% of small employers would use savings from an expanded scheme to improve wages or employee benefits. That points to a potential effect on existing staff as well as recruitment, although the findings describe employers’ intentions rather than confirmed spending commitments.

Small Business Rates Relief currently provides a full discount for qualifying properties in England with a rateable value of up to £12,000. Relief then reduces as rateable values rise towards £15,000, leaving a band of businesses with only partial support.

Those thresholds have remained unchanged for almost a decade. The FSB argues that extending eligibility would reduce the number of small firms facing a property tax bill before they have generated a profit.

The research and founders’ accounts were reported by Startups.co.uk ahead of the Budget. The £25,000 proposal remains a request to the Chancellor, rather than an announced change to the relief available to businesses.

The appeal sits alongside Budget tax relief calls from Marks & Spencer and John Lewis, with businesses seeking changes to the costs attached to operating physical premises.

The background

For employers running workshops, showrooms and storage facilities, business rates form part of the fixed cost of maintaining a site. Unlike expenditure that can be reduced when activity slows, the bill remains a commitment alongside rent before sales provide money for payroll.

Sofa bed manufacturer Furl illustrates the scale of that expense for a small employer with several properties. Founded by David Norman, it employs 21 people across four sites, including a Nottingham workshop and two London showrooms.

Norman puts the company’s annual business rates bill before relief at about £108,000. After relief, it pays about £91,000, making the property tax a substantial expense alongside the cost of its workforce.

Support is not uniform across the estate. Three Furl sites receive relief, but its Watford unit attracts none and carries a full rates bill of £38,000. The example shows why a business with several premises cannot assume that every property will receive the same treatment.

Rates are also only one element of the calculation behind a new job. Employer National Insurance, pension contributions and the National Minimum Wage all add to the cost of taking someone on; the minimum wage rises each April.

Hospitality operators face particular pressure from that combination of property and employment costs. The wider burden is examined in reporting on hospitality taxes reaching 82p for every £1 of profit.

What people are saying

FSB national chair Tina McKenzie describes the Budget as an early indication of the government’s willingness to support small businesses. She argues that the tax system should “reward ambition rather than punish it”.

Norman says additional relief would be directed towards staff rather than simply retained as a saving. His first recruitment priority would be another maker at Furl’s workshop if a higher threshold brought more of its properties into full relief.

Frederic de Ryckman de Betz, founder of HOLD Self Storage in London and former chair of the Self Storage Association UK, says rates do not adjust to weaker trading. In his account, meeting that bill takes priority over money that could otherwise fund recruitment or wage increases.

HOLD has already delayed a new site role this year because overheads have increased. That is a hiring decision already affected by costs, distinct from the employers surveyed about what they might do if relief changed.

Simon George, co-founder of business networking community Business Buzz, says hospitality businesses he works with regard rates as a major overhead. However, he identifies National Minimum Wage and National Insurance increases as the strongest sources of cost pressure reported to him.

George also links the narrowing wage gap between younger workers and older, more experienced staff to reduced willingness to recruit young people. He warns that this restricts opportunities to gain work experience, highlighting a recruitment barrier that wider rates relief alone would not remove.

What happens next

The Budget on 28 October is the next decision point for the FSB’s proposals. Its wider requests include a higher Employment Allowance, a £100,000 VAT registration threshold, a 14% Business Asset Disposal Relief rate and a Statutory Sick Pay rebate for small employers.

In the meantime, de Ryckman de Betz recommends checking whether a property’s rateable value is accurate through the Valuation Office Agency’s Check and Challenge service. He says errors are common; an incorrect valuation can affect the bill regardless of any future change to relief thresholds.

Businesses with several sites are advised to review relief separately for each property and ask the relevant council which schemes apply and whether an application is needed. Councils issue rates bills, and the financial consequences of unpaid liabilities are illustrated by Pembrokeshire’s pursuit of 97 businesses over unpaid rates.