Hotels within the City of London are bracing for a severe financial blow as a government overhaul of business rates is set to more than double their property tax bills. The reforms, announced in the November Budget, have ignited a fierce dispute between the hospitality industry and the Treasury.
Eye-Watering Increases for Historic Properties
The business rates system, which taxes companies based on the rateable value of their premises, is undergoing a major revaluation. Analysis by City AM reveals that leading hotels in the Square Mile, many of which occupy large, historic buildings, will see their rateable values spike by an average of 135 per cent starting in the new year.
From April 2026, the rateable value for 16 out of 18 assessed Square Mile hotels will double. On average, the increase amounts to a staggering £1,676,306 per property, signalling corresponding hikes in the final business rates bill. The levy is calculated by applying a City of London multiplier to the rateable value, though some tax relief is available.
Which Hotels Are Facing the Biggest Bills?
The analysis highlights several specific venues facing monumental increases:
- Canopy by Hilton, Minories: Its rateable value will soar by 287 per cent to £4,785,000.
- Doubletree by Hilton, Tower of London: Will see a rise of 121 per cent, adding £4,425,000 to its value.
- The Ned on Poultry: Its value will climb by 47 per cent to just over £5 million.
Industry Warns of a "Challenging Time"
The hospitality sector has reacted with alarm, arguing the government has failed to create a level playing field, especially compared to online giants. Kate Nicholls, chair of trade body UKHospitality, stated the Treasury was repeatedly warned that hospitality would be uniquely impacted due to pandemic-distorted previous valuations.
Thomas Emmanuel, a director in Savills’ hotels division, told City AM that central London hotels would be "disproportionately" affected. He warned this hike comes on top of other rising costs like National Insurance and minimum wage increases, creating a "challenging time" for the industry.
Property agency Savills estimates the capital's top hotels will have to pay £535 million in total in 2027-28, rising to more than £645 million in 2028-29.
Government Response and Relief Measures
The government has implemented some support measures, including a 40 per cent discount for hospitality businesses in the 2025-26 tax year. A Treasury spokesperson pointed to a £4.3 billion support package and highlighted the permanently lowered business rates for eligible retail, hospitality, and leisure properties.
However, a significant change is on the horizon: the current cap on business rates at 30 per cent of rateable value for properties over £100,000 will ease to 25 per cent plus inflation for the most expensive properties from 2027-28, before ending after the 2028-29 tax year.
The row has escalated beyond lobbying, with landlords recently launching a campaign to bar Labour MPs from pubs in protest. The hospitality sector insists the Treasury must take further action to correct what it calls "eye-watering" tax hikes that threaten venues across the Square Mile and beyond.
