Business rates relief could offer welcome breathing room for eligible small businesses, but an insurance expert warns that cutting cover to save money could leave them exposed. Craig Morgan at SJL Insurance Services explains why a lower rates bill should not mean less protection. Key points include:
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- One incident could wipe out the saving: a fire or damaged premises could leave an SME facing ongoing rent and wages while trading income stops.
- A cheaper premium is not always better value: Morgan urges owners to compare excesses, exclusions and limits, not just the price.
- Cover may no longer match the business: changes to turnover, stock, staffing, equipment or online activity could make a policy review overdue.
- Five practical checks for owners: rates eligibility, business information, insured values and limits, business interruption and policy terms.
The government estimates that around 70,000 additional retail, hospitality and leisure businesses in England will stop paying business rates under measures announced in the Autumn Budget.
From 1 April 2027, the rateable-value threshold for full Small Business Rate Relief for qualifying properties in those sectors will rise from £12,000 to £18,000, with tapered relief extending to £21,000. Eligibility will depend on the qualifying-property rules, rather than SME status alone.
The package also includes a two-year real-terms freeze for qualifying retail, hospitality and leisure properties, subject to exceptions.
Eligible pubs, social clubs and all but the largest live music venues will receive a further 20 percentage points of relief, taking total relief to 35% from April 2027.
Business rates and employment costs
The Budget also confirmed that the National Living Wage will rise by 3.9% to £13.21 an hour from 1 April 2027, increasing statutory minimum hourly pay for workers aged 21 and over.
Craig Morgan, insurance expert at SJL Insurance Services, said SMEs reviewing costs following the announcement should distinguish between reducing premiums and reducing protection.
“This is genuinely welcome news for the small businesses that qualify. But relief on one bill does not remove the risks involved in running a business. For an SME without a substantial cash buffer, one serious incident could wipe out the saving and put its ability to keep trading under pressure.”
He said: “If a fire closes a restaurant’s kitchen or damage prevents a shop from opening, the cost is not just replacing equipment or stock. Rent, wages and other commitments may continue while trading income is interrupted. Owners need to understand how they would manage that period.”
Business interruption policies can provide cover following specified insured events, subject to their terms. The insured cause, financial limits, conditions and indemnity period determine the scope and duration of cover.
He added: “The mistake is treating insurance as just another bill to trim without checking what you are giving up. Compare prices, absolutely, but compare the protection too. The aim is not to tell every SME to spend more, it is to make sure an affordable saving today does not create an unaffordable exposure tomorrow.”
Morgan also highlighted changes in turnover, stock levels, staffing, premises, equipment and online activity as areas to discuss when reviewing a policy.
Five areas for SMEs to review
Morgan set out five areas for owners reviewing their business costs and insurance:
- Rates eligibility. “Check your property’s rateable value and whether it qualifies for relief with the local authority. These measures concern England; businesses elsewhere should check their own arrangements.”
- Business information. “Review turnover, stock levels, staffing, premises, equipment and online activity, and tell your broker or insurer about relevant changes.”
- Values and limits. “Check current replacement costs for stock and equipment and, where relevant, buildings reinstatement costs. Rateable value is not an insurance valuation, and underinsurance can affect a claim settlement depending on the policy.”
- Business interruption. “Look at how long recovery could take and which ongoing costs would remain. Check the insured triggers and indemnity period and keep a practical continuity plan alongside the cover.”
- Policy terms. “Compare excesses, exclusions, conditions and limits before accepting a cheaper policy. Ask whether the business could afford the excess if it had to claim during a difficult trading period.”
Morgan added: “Ask whether the cover still matches the business you run today, not the one you ran when the policy was first arranged. If turnover, stock, equipment or the way you trade has changed, speak to your broker. Then ask how you would keep the business going if an incident stopped you trading. Business rates relief is welcome, but a lower bill does not mean the risks facing your business have changed.”
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