Hundreds of hospitals, police stations and military barracks are at risk of higher property taxes after Rachel Reeves proposed an “ill-thought-out” levy to subsidise Britain’s struggling high street.
A shake-up of business rates unveiled by the Chancellor at her maiden Budget last week was intended to “level the playing field” for smaller retailers by levying higher taxes on large distribution warehouses used by the likes of Amazon.
However, tens of thousands of other large properties could also be caught up by the tax hikes, according to commercial property consultancy Altus Group.
These include 297 hospitals, such as the Royal London Hospital, Bristol’s Southmead Hospital and Royal Derby Hospital, plus 310 universities and 309 colleges.
More than 200 government buildings – including prisons and military barracks – and even some police stations, such as New Scotland Yard, will be affected by the change, according to Altus.
The Government’s HM Treasury building on Horse Guards Road – where the new business rates policy was crafted – will also be hit by the measure, Altus said.
Alex Probyn, a tax expert at the group, said the Budget plan had been “ill-thought-out”.
“It is right for the Government to try and level the playing field, but the consequences of this plan haven’t been properly thought through with the vast majority of the revenue that will be raised not even coming from the online giants,” he said.
In the same way that households pay council tax, businesses must pay “rates” on their properties every year.
As part of plans to make tax fairer for struggling brick-and-mortar retailers, the Government said it would “permanently lower” the calculation of tax that these retail, hospitality and leisure premises have to pay if they are valued at under £500,000.
But to fund the move, and cushion the blow for the taxpayer, properties with a rateable value above £500,000 will have to pay more in business rates from 2026 onwards.
The Government said that most large distribution warehouses, which are used by online giants like Amazon, would be caught by the new levy and would help subsidise lower bills for high street retailers.
A Whitehall consultation is planned on the proposal to ensure the measures do not “disproportionately” impact public sector buildings.
However, according to Altus Group, it will lead to higher business rates bills for 15,278 non-housing properties, with large manufacturing sites also at risk of being hit.
Mr Probyn said the plan “just does not support long-term capital investment and productivity”.
According to Altus, there are a total of 16,867 non-domestic properties in England with a rateable value of £500,000 or more.
So far, the Treasury has not put a number on how much businesses will have to pay in new rates for 2026.
A Treasury spokesman said: “The Government is creating a fairer business rates system which is why the reform introduces lower tax rates for retail, hospitality, and leisure properties.
“We are committed to engaging with stakeholders to finalise plans so they meet the needs of all sectors, including the public sector.”