Taxation And Costs - New Natural Business

Taxation & costs

Are there any crumbs of comfort for health stores?

There’s “a mounting tide of objection from retail and wider business to Chancellor Rachel Reeves’ first budget,” reports The Grocer.

The British Retail Consortium warned of the “sheer scale of new costs” for retail, including increases in business rates and employers’ national insurance.

BRC says nearly £2.5bn would be added to the industry’s annual tax bill, making “job losses inevitable and higher prices a certainty”.

Meanwhile, Health Stores UK writing in this issue has reacted strongly to the Budget and the proposed Employment Rights Bill, both of which “could have existential repercussions for many of our members”.

There are, however, some crumbs of comfort for indie health stores.

Minimum wage

Debbie Gregory, owner of Elixir Health Foods, Wadebridge, believes the minimum wage increase, is the right thing to do.

“My team are worth far more than I can afford to pay them so I don't mind increasing their wages,” she told us. “Our shop is in an area with lots of people on the minimum wage, therefore if this gives everyone more money to spend in my shop then surely that is a win for us all.

“The increase in the employer's national insurance contributions and the new sick pay scheme on the other hand will affect us and I will have to think twice before giving anyone extra hours to cover sickness and holidays. Which then kind of makes the pay rise not a pay rise if they get less hours and their take home pay at the end of the month is less.”

National Insurance contributions

National insurance (NI) contributions for employers (not employees) will increase by 1.2 percentage points to 15% from April 2025. The point at which employers start paying NI will fall from £9,100 a year to £5,000 a year.

Both of the above are massive, however an increase in employment allowance from £5,000 to £10,500 will mean thousands of businesses won't pay any NI at all from April. It will also mean more than a million businesses will pay the same or less than they did previously.

This is designed to remove the burden for very small businesses or mitigate the increase to smaller businesses – typically most indie retailers in our trade.

The Chancellor reckons the doubling of the employment allowance means that 865,000 employers would not pay any NI at all next year if they employed the equivalent of four or fewer people full-time.

Business rates

The government will introduce permanently lower business rates for retail, hospitality and leisure businesses from 2026-27. Until then they will receive 40% relief on business rates up to a cap of £110,000.

High street shops, bars and restaurants were granted a 75% discount on business rates during the coronavirus pandemic, which will fall to 40% in April.

Since the Budget, the government has drafted legislation to introduce permanently higher business rates for those occupying the most valuable 1% of properties to pay for a lower rate for their smaller competitors. The higher rate will be payable for properties with a rateable value of £500,000 or more.

Treasury minister James Murray told The Grocer that the move – due to start in 2026 – will help make sure online giants pay “a fairer share” while adding the higher rate will also capture other out-of-town businesses that draw footfall away from high streets.

Scotland

The business rate relief did not apply in Scotland. Edinburgh store owner John McKee, hosting Scottish Labour leader Anas Sarwar, was reported by Natural Newsdesk as asking the Scottish government to match the UK scheme.

“The costs of running a business like this are extremely challenging,” he said. “Even though we’ve recovered in turnover terms since the pandemic, and we’ve just had four of our best ever months, I’m not making a profit.

“Back in 2015 when I took over the business I committed to being a Real Living Wage employer. Since then staff costs have increased by 50%, while inflation over the same period was 33%. It’s very difficult to get the figures to add up. So let’s see what happens when the [Scottish] Budget is delivered on 4 December.”