More businesses set for tax relief as government unveils latest rates cuts

Prime Minister Andy Burnham has announced plans to cut business rates for pubs, clubs and live music venues in England by 20% from April 2027.

The new business rates cut is expected to benefit around 32,000 venues and save them an estimated £1,100 over the course of the 2027-2028 year. This follows a 15% cut introduced for pubs, clubs and live music venues in April.

Announcing the plans this morning, Burnham said this was “just the start” as his government brings in targeted measures to support “the businesses that people want to see in their communities” and restore public confidence in the government’s ability to address the costs pressures facing working people and communities.

Commenting on the proposals, Clare Francis, a commercial expert with Pinsent Masons, said: "Following a prolonged period of inflationary pressure, rising wages and rising operating costs, the cut to business rates for pubs, clubs and live music venues will be a welcome boost for the hospitality industry. Beyond providing much-needed relief to businesses facing continue pressure on margins, the measure is a clear signal of the Burnham government's community-minded approach, placing emphasis on supporting the businesses that people want to see at the heart of their local high streets."

However, the latest business rates cuts contain some notable omissions. The government said larger live music venues would be exempt for the time-being from the changes to ensure support was targeted at those venues most in need. Further details are expected be outlined in the autumn Budget.

The cuts also do not extend to hotels, restaurants or other hospitality venues. Allen Simpson, chief executive of trade body UK Hospitality said more needed to be done to help the hotel and restaurant sectors, which are facing mounting electricity, labour and other operational costs. “The prime minister is right to say this should be just the start,” he said. “Restaurants are struggling just as much as pubs, while hotels are due to see their business rates bills increase by an average of 110%, the highest in the sector.”

Francis said the exclusion of certain venues would naturally be “a source of frustration for many operators” and was unlikely to end the debate on business rate reform.  “The government has signalled that further details will follow in the autumn Budget and many hospitality businesses that continue to face significant cost pressures will be hoping this is the first step in a broader programme of support that promotes investment, growth and thriving high streets,” she added.

Today’s cuts follow the government’s earlier announcement in May, which introduced a temporary reduced rate of 5% VAT for children's meals, tickets and family attractions for summer 2026. These changes, introduced before Burnham replaced Keir Starmer as prime minister, lower the standard rate of VAT from 20% to 5% for family-related supplies and activities across the whole of the UK from 25 June to 1 September.

Timed to span the school summer holidays across England, Wales, Scotland and Northern Ireland, the government said the changes were designed to “reduce the cost of selected activities and services for families with children during the summer holiday period”.

Bryn Reynolds, a VAT expert at Pinsent Masons, said that while these temporary measures clearly spelled good news for young families, he cautioned that the government may not have fully thought through their potential impact, particularly on small businesses, which he said “will now be required to adjust their VAT accounting software for just a few short months” to cover the summer period. “The intention is obviously that the benefit will be passed on to the customer,” he added, “so HMRC’s approach to retrospective claims, where businesses had not adjusted their pricing but seek to recover VAT over-accounted for during the period, will be interesting.”

These changes reignited wider calls for broader VAT cuts to boost the retail and hospitality sectors – only some of which appear to have been heeded by Burnham’s government during his first week in office.

The government said the business rate cuts would be “fully funded”, in part by reviewing the tax relief currently applied to certain businesses, such as vape shops, that are considered not to make a “positive contribution” to local communities.

It also intends to fund the cuts through plans to crackdown on businesses that attempt to avoid paying tax by selling through online marketplaces. In June the government launched a consultation on proposals to extend VAT liability for online marketplaces over concerns too many overseas sellers are avoiding VAT when selling to consumers in the UK and costing the public purse hundreds of millions of pounds each year.

If extended, the potential implications would be seismic for online takeaway, food delivery platforms, restaurants, fast food kitchens and takeaway outlets in the hot food deliveries sector since many of these platforms are currently exempt from previous reforms because their businesses are situated entirely in the UK. The consultation is open for feedback until 18 August.

Reynolds added: “The announcement that future improvements to the business rate system will be funded by revenue raised from reforms targeted at non-compliant sellers on online marketplaces is an interesting one given that the consultation hasn’t actually closed yet. This rather suggests that additional measures are a foregone conclusion albeit the proposed measures were broadly welcomed. The government is clearly seeking to draw a direct line between additional taxation on the non-compliant sellers and its support for high street businesses”.