Rise in business rate threshold for small firms will help some pharmacies

In his Budget delivered to Parliament on Wednesday (28) the Chancellor John Healey said that he would raise the threshold at which small companies start paying business rates.

"I'm increasing the threshold for Small Business Rate Relief for retail hospitality and leisure businesses from £12,000 to £18,000," Healey said in his Budget speech to Parliament.

The figures relate to "rateable value", the estimated annual rental value of a commercial property.

Healey said the move will mean 70,000 businesses will not pay any business rates – a property tax charged on commercial properties to fund local services.

He said other businesses in the retail, hospitality and leisure sectors would see their rates frozen in real terms.

Prime Minister Andy Burnham had said in July he would lower business rates for pubs, clubs and live music venues by 20% from April 2027.

The Budget was described as designed to give "breathing space" from rising costs for families and businesses in the UK.

Partial relief: NPA

Responding to the announcement, National Pharmacy Association Chief Executive Henry Gregg said: "With the Government rightly focused on everyday fixes for millions of people, they need to remember that community pharmacies are the bedrock of our communities and the neighbourhood health service and support them accordingly.

"It is good news that the Chancellor has listened to the concerns of the NPA and others and have extended business rates relief to more pharmacies in England, although many with higher rateable values will still be hit by this tax.

"Pharmacies have faced very significant increases in their business rates in recent years and we have been clear that without urgent action, some pharmacies could be at serious risk of closure.

"However, it is still grossly unfair that pharmacies are forced to pay business rates at all, given that both GP and NHS dentist colleagues are exempted. The government must reform the business rates system to exclude pharmacies from it entirely.

"Pharmacies want to do all they can to support and attract staff and help those working for them cope with a rise in the cost of living. However, 90 per cent of our funding comes from the NHS and pharmacies cannot flex their costs to absorb these increases in the National Living Wage and National Minimum Wage.

"If the government wants to allow pharmacies to expand and bring care close to home, they must support them meet these imposed costs or risk pharmacies having to cut back on services to patients to afford them.

"Pharmacies are central to the government's 10-year plan ambitions to reduce pressure from the wider health system. However, they are under enormous pressure and have been closing in record numbers due to a decade of underfunding.

"The Health Secretary must ensure pharmacies see sustained long term increases to their funding if we are to being an end to pharmacy closures and instead expand the services they offer their patients."

CPE: No clear sign of relief for pharmacy owners

Janet Morrison, Chief Executive of Community Pharmacy England, said that the Budget had not been a positive one for pharmacy businesses.

“Today's Budget brings no clear sign of relief for pharmacy owners. The minimum wage increase will place yet another significant cost burden on community pharmacies at a time when businesses are already under intense financial pressure. And this comes on top of the continued challenges pharmacies face with medicines supply, dispensing at a loss, rising operating costs and workforce pressures,” she said.

Significant investment in community pharmacy is required she said, as costs for pharmacy businesses continue to rise.

“Whilst there were some positives – such as an ambition to reduce NHS admin and some business rates relief – these won't offset the cumulative impact of rising costs across the sector, and the outstanding funding gap.

“Every day we hear from pharmacy owners struggling to keep their businesses viable whilst continuing to provide essential care for their patients and communities. We have repeatedly warned Government and the NHS about the consequences if these challenges continue to go unaddressed and will be making this point firmly in the upcoming CPCF negotiations.

“Community pharmacies continue to deliver – generating more than £31 billion in net benefits for society every year – and if the Government wants to shift care closer to people's homes, it must invest in a sustainable future for pharmacies.”

Little relief for the sector: CCA

Also commenting on today’s Budget, a spokesperson for the Company Chemists' Association said:

“Today’s Budget brings little relief to the sector. Costs continue to rise at a time when community pharmacies face an ever-increasing workload.

"Forthcoming funding settlements must continue to close the funding gap, so that patients can continue to access the vital medicines they rely on."

Business rates for Mayors

Healey said his government's "fiscal devolution" will see "100% of business rates retained locally by the end of the decade".

Mayors, and some other local authorities, will also have additional powers from 2028 to introduce overnight visitor levies.

Healey described it as the "biggest wave of devolution in a generation, driving good growth in every postcode".

"For the first time I'm making the commitment that 100% of business rates will be retained locally by the end of the decade."

"From next year, 20% of business rates revenue will go to mayors. From 2028, a share of income tax receipts will go to mayors as well. From 2028, mayors and other strategic authorities will have new powers to introduce an overnight visitor levy."

AI for NHS

Healey announced a review of NHS productivity and AI "so staff can spend their time with patients, not on admin".

He spoke about "streamlining the state through devolution" to reduce "double-running between central and local government".

Healey then describes a "new focus on prevention", and says at the next spending review he will "ringfence prevention spending that brings down costs in future, with new preventative departmental expenditure limits".

Minimum wage hike

Healey announced that the main minimum wage rate would increase by 3.9%.

The rate paid to workers aged 21 and over, currently £12.71 an hour, and the rate payable to workers aged 18-20, now £10.85, will both rise by 3.9%. Some analysts and employers had blamed larger jumps in the rate for younger workers for increasing youth unemployment.

The increase means the National Living Wage will increase to £13.21 an hour and the 18-20 National Minimum Wage will be £11.27.

"For 2.3 million of our lowest-paid workers, I'm increasing both the national minimum wage and the National Living Wage by 3.9%," Healey said.

In April, Britain's Low Pay Commission – which advises on minimum wage rates – had said the National Living Wage would probably need to increase by around 3.7% in 2027 to £13.18 an hour to keep up with how it expected average pay to rise.

Wage hike to hit pharmacies: McQuillan

Numark Chairman Professor Harry McQuillan highlighted the increase in national minimum wage as a further increase in operational costs for pharmacies.

“The Chancellor had a long list of priorities coming into this Budget; the NHS is under huge pressure, and so are the public purse strings. It’s therefore no surprise that community pharmacy wasn’t top of the list in today’s Budget.

"One thing is for sure, a thriving and sustainable community pharmacy network is important for local economies and also reduces pressure across the wider NHS. Every pound invested in community pharmacies pays back a double benefit – supporting local high streets and strengthening frontline care.”

“While the increase in minimum wage is an understandable measure to help those struggling with the cost of living, it causes a yet further increase in operating expenses for the community pharmacy network, which has very limited ability to pass those costs directly on to patients. If funding for pharmacies does not increase alongside wage costs, it will ultimately lead to pharmacies considering reducing staff hours, limiting investment in new services and delaying recruitment.

Community pharmacies have taken on increasing responsibility for frontline NHS services, relieve pressure elsewhere in the NHS and reach patients who may not typically engage with the NHS.

Yet, to really deliver a high-quality and accessible service for patients: “we need to give the sector the financial support it needs,” he said.

"Community pharmacies are operating on tight and ever tightening margins, which have just been squeezed even more, while they continue to be excluded from business rate relief. While it will offer support for workers, it should be paired with financial support for the businesses at the heart of our communities and at the forefront of the NHS.”

New ventures

Healey has announced a new trading allowance, raising the amount people can earn from a new venture tax-free from £1,000 to £3,000.

The Chancellor is also launching a new young entrepreneur’s allowance, which will cover a year of living costs for young founders "while they turn their ideas into businesses".

He's also announcing a new scale-up programme to female founders, adding that the British business bank will double its commitments to women-led businesses in funds to £200m.

Given the risks of building a company, the government should recognise that success and keep those people in the UK. Healey announces a "founders' relief", a 10% rate on lifetime gains up to £10m for the founders of Britain's most successful firms.