The National Living Wage will increase by 4.4% to £7.83 per hour next April, but retailers will benefit from a share of a £2.3bn saving on business rate rises, the chancellor announced today.
The rise in the hourly NLW rate, which applies to people aged 25 and over, will coincide with the biggest rise in the youth rate in 10 years, Philip Hammond revealed in the Budget on Wednesday.
He also announced an increase in the income tax threshold allowance to £11,850, while the 40% tax threshold will rise to £46,350.
Hammond said the annual indexation of business rates will be based on the CPI rather than RPI measure of inflation from April 2018, which he claimed would save businesses £2.3bn. “We’ve listened to concerns about the potential costs of next year’s upgrade,” he said.
Future business rate revaluations will now take place every three years instead of five, following the next revaluation in 2022, he added.
Commenting on the business rates announcement, Association of Convenience Stores chief executive James Lowman said: “We welcome the introduction of more frequent revaluations but only if this doesn’t place more burdens on retailers to assess and relay information on their properties to the government. The introduction of more frequent revaluation must be delivered hand in hand with a simplification of the business rates system, where possible removing the smallest business from the burden of rates.
“The move from RPI to CPI for business rates indexation will reduce rates bills for local shops. However, the government needs to ensure that existing reliefs are getting through to local shops that need it.”
Elsewhere, Hammond said he would investigate introducing a new tax on single-use plastic items in a bid to cut plastic waste.
Forecourt retailers will benefit from a £400m investment in electric vehicle charging points.
Tobacco and alcohol
The price of cigarettes and roll your own (RYO) tobacco will rise again, with the tobacco duty escalator set to continue at inflation plus 2% - with an additional 1% on duty on RYO - from today (Wednesday). “Every time the chancellor increases tobacco duties he drives more consumers to the illicit market and away from local shops,” Lowman said.
Hammond also announced that duty on high-strength “white ciders” would also increase, via new legislation.
“Excessive alcohol consumption by the most vulnerable people in society is all too often through to high-strength, cheap, low-quality products, especially so-called white cider,” he said.
The government will introduce a new duty band for still cider and perry from 6.9% to 7.5% ABV to target white ciders, and legislation will be brought forward in the Finance Bill 2018-19, for implementation in 2019, to allow producers time to reformulate and lower their ABV.
However, duty on beer, wine and spirits will be frozen. “The Alcohol duty freeze will be welcomed by local shops across the country. We are also pleased the chancellor has heeded our advice to delay future alcohol duty changes until 1 February each year so retailers are not burdened with changes prices during the busy Christmas period,” Lowman said.
Changes to the minimum wage
Aside from the National Living Wage increases, the government will also accept all of the LPC’s recommendations for the other minimum wage rates to apply from April 2018. For youth rates, this represents the largest increase in 10 years.
The recommendations include:
• increasing the rate for 21 to 24 year olds by 4.7% from £7.05 to £7.38 per hour
• increasing the rate for 18 to 20 year olds by 5.4% from £5.60 to £5.90 per hour
• increasing the rate for 16 to 17 year olds by 3.7% from £4.05 to £4.20 per hour
• increasing the rate for apprentices by 5.7% from £3.50 to £3.70 per hour