A lobby group has warned convenience stores could be set for a huge bill next year as tax hikes are expected to be included in the Autumn Budget.
The Association of Convenience Stores has said the sector will face a potential bill of £634m due to wage increases, plus changes to National Insurance contributions and business rates.
ACS chief executive James Lowman said: “Our sector is at the sharp end of the fight against retail crime, faces pressure on operating margins, and is set to be impacted by a host of new regulations.
“The Chancellor must share the burden of taxes and new costs fairly, and recognise the vital role that local shops play in more communities than any other physical business, right across the country.”
The national living wage will increase by 5.8 per cent from its current rate, taking the convenience sector wage bill from £7.2bn to over £7.6bn.
The biggest determinant of the cost of employer national insurance contributions (NICs) to the sector is the rate of the living wage.
At a rate of £12.10 per hour and with no other changes, employer NICs would increase in 2025 from £312m to £364m, according to ACS.
Convence stores braced for higher taxes
Reports indicate that Rachel Reeves is planning to hike employer national insurance by one or two percentage points while also lowering the threshold at which businesses start paying the levy.
If there were to be a one percentage point increase in the rate of employer NICs – from 13.8 per cent to 14.8 per cent – the cost to convenience stores would increase to over £404m.
Reeves could, alternatively, impose national insurance on employers’ pension contributions rather than national insurance, making it harder for businesses to pass on cost to employees.
The total cost of pension contributions for the convenience sector is set to rise from £101m to £110m in 2025.
If employers were required to pay national insurance contributions on their pension contributions, this would cost an additional £15m, according to ACS.
The final policy which may affect stores is business rates. The current relief is 75 per cent, but it is meant to expire on 31 March, which would add £300m to the sector’s tax bill.
The British Retail Consortium (BRC) has previously called for a discount – or ‘rates corrector’ of 20 per cent in the budget.
Business rates, effectively a tax on commercial properties, have been a contentious subject for years, with scores of retailers – from Sainsbury’s to Fuller’s – calling for a cut or general reform.
“The current business rates system… places bricks and mortar retailers at a significant disadvantage to online retail,” General Secretary of USDAW Paddy Lillis, said earlier this year.
“In effect, this amounts to nothing more than an unfair tax on shops and action has to be taken to level the playing field,” Lillis added.
Ultimately, the two key policies to watch out for in the Autumn Budget for shops on the high street are business rates and changes to employer pension and insurance contributions.
It is becoming increasingly likely that the latter two will increase, with the sector holding out hope for relief on the former.