Increases to small business rate relief and national minimum wage announced in Budget

An increase in small business tax relate relief was announced in the Budget yesterday (Wednesday 28 October).

Chancellor of the Exchequer, John Healey, framed his first Autumn Statement as “a budget for businesses big and small” that aimed to give “families and businesses breathing space now.”

The small business tax rate relief threshold will move from £12,000 to £18,000 for retail, hospitality and leisure businesses, Healey said.

He noted that this change will mean half of all shops, restaurants and gyms will not pay any business rates at all.

All retail businesses that do pay business rates will have their rates frozen for two years.

The Chancellor also announced that “100% of business rates will be held locally by the end of the decade.”

This will be achieved through the devolution of revenues made from business rates to mayors, so that “money made locally can be spent locally,” Healey said.

The devolution of business rate revenues is part of Prime Minister Andy Burnham’s wider devolution agenda, which the Government hopes will energise parts of the UK outside of London.

An increase of 3.9% to the national minimum wage from April 2027 was also announced in the Budget.

This means that the national minimum wage for those aged 21 and over will increase from £12.71 to £13.20 an hour.

Healey also confirmed that he would not increase taxes for working people or make cuts to public services as part of the Government’s spending plans.

Reaction to the Budget

The Federation of Small Businesses (FSB) does not believe that the Budget will go far enough to help their members.

Tina McKenzie, national chair of the FSB, said: “This Budget should have been the moment to help small businesses with the soaring costs holding them back, and the taxes restricting job creation. Instead, they got nothing to ease sky-high energy bills and nothing to make hiring someone more affordable, while the increase in business rates relief excludes too many.”

The Budget “missed the mark” on achieving growth in every postcode, McKenzie believes.

FSB research from the second quarter of 2026 shows that 48% of small businesses expect their revenues to shrink in the coming months.

“There was nothing today anywhere near big enough to change that gloomy outlook,” McKenzie noted.

The increase in small business rate relief is welcome but should have been applied more widely, she added.

She noted: “Of the smaller measures announced, we’re pleased the Chancellor has acted upon our call to increase the trading allowance from £1000 to £3000.

“This will incentivise potential small business owners of the future to take the first steps to exploring a business idea, alongside the new young entrepreneurs’ allowance.”

The British Independent Retailers Association (Bira) had a more positive outlook, calling the Budget’s business rates announcement “a win for independent retailers.”

Andrew Goodacre, chief executive of Bira, said: “This Budget has not contained any of the nasty surprises from the past two years. In fact, we are pleased to see small business rates relief increased by 50%, and all other rates increases next year linked to inflation.”

Goodacre added: “Bira raised these issues as genuine concerns on several occasions in the run-up to the Budget, and we are delighted that the Treasury has listened. This is a real win for independent retailers.”

However, he noted that “the lack of measures to reduce the cost of employment and energy is disappointing. Increasing the employment allowance would have been a real help to small employers, and this was a missed opportunity.”

Dr Peter Hampson, AOP clinical and policy director, highlighted that a focus on primary care was missing from the Budget. 

“The autumn Budget, as expected, is light on funding for healthcare,” Hampson said.

He emphasised: “Community optometry is already helping to relieve pressure on hospitals, GPs and A&E departments, and we believe there is much more the profession can do if services are properly funded and commissioned.

“Our work earlier this year highlighted that hundreds of thousands of patients attending A&E could instead be managed in community optometry practices. To realise this potential and reduce pressure on the wider NHS, the optometry sector needs additional funding and commissioning support.”

The AOP will publish a policy briefing on the Budget in due course.