A pint of pie and a pub is about to get a bit cheaper, but that relief has left other high street businesses – from gyms to beauty salons – feeling ‘left out in the cold’. New Prime Minister Andy Burnham has announced a 20% cut in business rates for pubs, clubs and live music venues from next April, costing the Treasury an estimated £100m. The policy is part of a broader agenda to support the high street, but it has reignited a long-running debate about who should pay what in business rates – and whether the system is fundamentally fair.
Business rates are a tax on the value of commercial property, paid by most businesses that occupy a building – shops, offices, warehouses, factories, pubs, gyms, you name it. The tax is calculated based on the property’s ‘rateable value’, which is roughly the annual rent it could fetch on the open market, multiplied by a ‘multiplier’ set by the government. For a typical pub with a rateable value of, say, £50,000, the annual bill before relief can be well over £20,000. The new 20% discount comes on top of emergency relief already rolled out in January, meaning the average pub will save more than £1,000 next year, according to tax experts.
“Burnham's 20% business rates cut for pubs stirs high street row – explained”
But the relief is not universal. Beauty salons, community gyms, cafes and restaurants are excluded. The British Beauty Council called it a ‘slap in the face’, noting that the beauty sector contributes £28.3bn to the UK economy and employs hundreds of thousands of people. Ruth Dawson, who runs HD3 Fitness Centre in Huddersfield, told the BBC she was ‘left out in the cold’ and argued that a community gym that keeps elderly residents mobile is every bit as vital as a pub. Nick Smith, who runs the Ludoquist board game café, questioned the logic of excluding cafes and restaurants.
The debate over business rates is not new. Pubs and the wider hospitality industry have long argued they are unfairly burdened. According to Keith Bott of Titanic Brewery, around 35-40% of pub turnover goes to the Treasury through various taxes. Business rates account for about 16p of a typical pie-and-pint meal, according to pub owner Dan Smith, compared with £3.42 in VAT. Hospitality businesses also face employer National Insurance increases, a rising minimum wage, high inflation and climbing cost of living. Colm O’Leary of Packed House, a hospitality consultancy, says a typical £1m-turnover hospitality business makes only £13,500 profit after tax, highlighting how thin margins are.
Meanwhile, the government had also been considering a so-called ‘Amazon tax’ – a higher rates multiplier on large distribution centres operated by firms like Amazon and Asos, which could have raised up to £1bn. That plan has been delayed, but retailers remain wary. The Retail Gazette notes that a warehouse tax would in practice be a tax on valuable property, not just on online giants. The tension between taxing bricks-and-mortar shops and taxing online warehousing is at the heart of the business rates reform debate.
For UK readers, this matters because business rates affect every high street – and every bill you pay. If you are a customer, the cost of rates is baked into the price of your pint, your haircut, your gym membership. If you run a business, rates can be the difference between staying open or shutting down. Pubs are closing at a rate of about one a day, and while the 20% cut helps, industry leaders say it is ‘a small snippet’ compared with other costs like VAT and wages. The British Beer and Pub Association estimates that a 10% cut in VAT would have a far bigger impact than the rates discount.
Q: What are business rates and how are they calculated? Business rates are a tax on non-domestic property in England and Wales (Scotland and Northern Ireland have separate systems). They are calculated by multiplying the ‘rateable value’ of a property (its estimated annual rent) by a ‘multiplier’ set by the government. Properties with lower rateable values may qualify for relief. The multiplier for 2026-27 is yet to be confirmed.
Q: Why are pubs getting a special discount while other businesses are not? The government says pubs, clubs and live music venues are ‘the heart of the community’ and have been hit especially hard by recent cost pressures. However, critics argue many other businesses also serve communities – gyms, beauty salons, cafes – and the policy unfairly picks winners. The 20% discount is on top of existing relief, so pubs already pay less than some other sectors.
Q: Will the business rates cut save pubs from closure? Possibly, but only marginally. Industry experts say the main pressures on pubs are VAT (20%), high energy costs, rising wages and employer taxes. The £1,000 saving per pub is welcome but ‘dwarfed by other costs’, as one analysis puts it. A reduction in VAT from 20% to 10% – which Burnham supported as mayor – would have a more significant impact, but would cost the Treasury an estimated £10bn.
What happens next? The 20% discount is due to take effect from April 2027. But the broader business rates system remains under review. The government has already committed to a nationwide property revaluation, which has caused bills to oscillate for some businesses. Campaigners are calling for a fundamental overhaul, including making the system fairer between physical shops and online warehouses. Meanwhile, businesses excluded from the relief are lobbying hard for inclusion – and some, like the beauty industry, are already preparing a public campaign. The Treasury will also be watching the impact of the cut on pub closures, with the policy up for evaluation within a year.