Understanding the UK Government's Proposed Business Rates Reforms for Pharmacies

The UK government has announced significant changes to the business rates system, with draft legislation introduced to permanently reduce rates for pharmacies and other high-street retailers from 2026. This reform is a step towards creating a fairer tax system while addressing the growing financial pressures on local businesses.

In this article, we explore what the proposed changes mean for pharmacies, their implications, and how business owners can prepare.

What Are Business Rates reform for pharmacies?

Business rates are a property tax charged on non-domestic properties, such as shops, offices, and warehouses. Calculated based on a property's rateable value, they form a significant cost for businesses and contribute to local government funding.

For pharmacies, especially independent ones, business rates are a substantial operational expense, often exacerbating the challenges posed by rising costs, competition, and evolving healthcare regulations.

Challenges Faced by Pharmacies

Pharmacies, as vital community hubs, have been grappling with several issues in recent years:

• Rising Operating Costs: Increased wages, higher National Insurance Contributions (NICs), and inflationary pressures have made it harder for small businesses to stay afloat.

  
  

• Competition from Online Retailers: The surge in e-commerce has drawn customers away from high-street pharmacies, impacting revenue.

  
  

• Regulatory and Tax Pressures: Tax hikes, including employer NIC increases, have added financial strain on top of an already challenging operating environment.

  
  

These challenges have intensified calls for reforms that would alleviate financial pressures on high-street businesses.

The Government's Proposed Reforms

The government has laid out several key measures to address these challenges:

1. Permanent Reduction in Business Rates (from 2026) Pharmacies and other retail businesses with a rateable value (RV) under £500,000 will benefit from permanently reduced business rates multipliers. This aims to create a fairer system that supports smaller businesses.

   
   

2. Interim Support (2025-26)

   
   

   • A 40% relief on business rates will be provided for retail, hospitality, and leisure properties, capped at £110,000 per business.

   • The small business multiplier will be frozen to prevent inflationary increases.

     
     

3. Higher Rates for Large Properties To fund these reductions, the government plans to apply higher multipliers on properties with an RV over £500,000. This measure primarily targets large warehouses and distribution centres, particularly those used by e-commerce giants.

   
   

Why These Reforms Matter to Pharmacies

The proposed changes have been introduced to support high-street businesses, including pharmacies, which are essential to local communities. Here’s how they could benefit pharmacy owners:

• Lower Operational Costs Reduced business rates will free up capital, enabling pharmacies to reinvest in staff, facilities, and community services.

  
  

• Improved Competitiveness By addressing the disparity in tax burdens between online and physical retailers, these reforms aim to level the playing field and help pharmacies compete effectively.

  
  

• Stronger Community Ties Financially secure pharmacies are better positioned to offer essential healthcare services and maintain their role as pillars of local communities.

  
  

What Pharmacy Owners Should Consider

While the reforms are promising, pharmacy owners need to stay proactive in preparing for these changes. Here are some steps to consider:

1. Monitor Developments Keep an eye on the legislation’s progress and any updates regarding the 2026 business rates revaluation.

   
   

2. Review Financial Plans Update your business forecasts to reflect the expected reductions in operating costs. This could help identify areas for reinvestment or expansion.

   
   

3. Engage in Consultation Participate in industry consultations and provide feedback on how these changes can best serve the pharmacy sector.

   
   

4. Explore Interim Relief Take full advantage of the temporary relief measures for 2025-26, ensuring you meet eligibility criteria and maximise savings.

   
   

Implications Beyond Pharmacies

These reforms highlight the government’s broader ambition to revive high streets and make the tax system more equitable. By targeting relief to smaller businesses and increasing rates for large infrastructure properties, the measures seek to create a more balanced economic environment.

However, uncertainty around the 2026 revaluation remains. The government has yet to specify the exact rates for revised multipliers, and the final impact on businesses will depend on the outcomes of the Valuation Office Agency's review.

Conclusion

The proposed reforms to business rates are a welcome development for pharmacies and high-street retailers, signalling a shift towards supporting smaller businesses. By reducing financial burdens, these measures aim to encourage investment, enhance competitiveness, and ensure the long-term sustainability of local businesses.

For pharmacy owners, this is an opportunity to reassess their financial strategies and prepare for a more supportive fiscal landscape. While challenges remain, these reforms could pave the way for a stronger, more resilient high street in the years to come.

Contact Us

If you have questions about navigating the 2024 Autumn Budget or optimising tax strategies for your pharmacy business, PKPI Chartered Accountants is here to help. Whether you need advice on understanding business rates reform, managing your tax liabilities, or structuring your finances for maximum benefit, our team of experts is ready to support you.

Visit us at www.pkpi.uk/contact-us or schedule a consultation at www.calendly.com/gagan-singh. We are committed to providing tailored advice that helps pharmacies stay ahead in the changing landscape of tax and business rates. Let us help you maximise your savings and ensure a stable financial future for your pharmacy business.

10 Frequently Asked Questions About Areas Benefiting from the UK Government's Proposed Business Rates Reforms for Pharmacies

1. How will the proposed business rates cuts benefit small, independent pharmacies?

The business rates relief will offer significant support to small, independent pharmacies, particularly those with properties under the £500,000 rateable value threshold. These pharmacies will see permanent reductions in business rates starting from 2026, providing them with much-needed financial relief. This allows smaller pharmacies to stay competitive and invest in their growth, making them better equipped to continue serving local communities.

2. What are the key advantages of the proposed relief on RHL (Retail, Hospitality, and Leisure) businesses for pharmacies?

3. How will the transitional relief impact pharmacies before the permanent tax cuts are implemented?

4. Will online pharmacies be affected by the business rates reforms?

5. How will these reforms impact pharmacy chains with multiple locations?

6. Are there any other tax incentives for pharmacies under the government's new business rates plan?

7. How might these business rates reforms affect the hiring practices of pharmacies?

8. Will these changes influence pharmacy technology investments?

9. What steps should pharmacy owners take to prepare for the upcoming reforms?

10. How can pharmacies ensure they maximise the benefits of these business rates reforms?