Reform in England
In its election manifesto, the Labour party pledged to "replace the business system …[to] raise the same revenue but in a fairer way" with the aim of "levelling the playing field between the high street and online giants, better incentivise investment, tackle empty properties and support entrepreneurship".
At its first Budget on 30 October 2024, the new Government published a discussion paper, Transforming Business Rates. This set out a framework for future reform in England. Rather than an overhaul of the system, the Government has proposed a number of tweaks round the edges to address some of the most heavily criticised aspects. There appears to be no appetite at this time to replace the largely dysfunctional business rates system with an alternative system such as a land value tax, a proposition supported by many economists and think tanks.
From April 2026 the Government will introduce permanently lower multipliers for retail, hospitality and leisure (RHL) properties which have a rateable value under £500,000. This reduction will be funded by a higher multiplier on all properties with a rateable value over £500,000. The Government has confirmed its commitment to this policy in its next steps paper "Business Rates: Forward Look" published in February 2025. Those RHL businesses with portfolios of properties with rateable values under £500,000 could therefore see a reduction in their business rates bill in England. This measure aims to target large distribution centres used by online retailers (as these large warehouses are likely to have a rateable value exceeding £500,000). However, it is also likely that most large retail outlets, hotels, and supermarkets will have a rateable value above £500,000 and could be subject to an increased rates bill from April 2026. The next revaluation date in England will also take place on 1 April 2026 and there may be some uncertainty about whether some properties will fall under or over the £500,000 threshold, making it difficult for businesses to plan. The Government plans to publish the new multipliers alongside the UK Budget this autumn. As large employers, those in retail and hospitality may feel particularly hard hit following the increase to the rates of employers national insurance contributions, which came into effect in April 2025, and be concerned that an increase to already high business rates bills will have an effect on profit margins.
Other changes being considered by the UK Government include:
- the adoption of a slab to slice system for business rates in England which could see more bands, with higher rates for properties with a higher rateable value;
- reviewing the newly-introduced improvement relief, noting there can be a disincentive to make improvements to properties if the effect is that there will be a consequential increase to the rateable value;
- anti-avoidance measures to give powers to local authorities to target avoidance of business rates bills; and
- a review of the efficiency of empty property relief.
Significant additional compliance obligations are also coming down the track, following the enactment of the Non-Domestic Ratings Act 2023. Once relevant provisions are in force, ratepayers will be under a new duty to notify the Valuation Office Agency within 60 days of any changes in the identity of the ratepayer or changes that might affect the rateable value of the property (for example following improvements). There will also be an obligation to file an annual return within 60 days of 30 April every year, with the ratepayer confirming they have provided all required information and complied with legislative requirements.
Scotland
As business rates is a devolved tax in the UK, retailers with a portfolio of properties need to navigate the different regimes existing in England, Scotland and Wales.
Key differences in Scotland include different thresholds for rates (basic, intermediate and higher) depending on the rateable value of the property, with a tone date of one year (rather than two in England). At its most recent Budget, the Scottish Government froze the multiplier for the basic property rate, with other rates rising with inflation, and confirmed a limited 40% relief for small properties in the hospitality sector with a cap of £110,000 per business, and a temporary 100% relief for hospitality premises in the islands.
Notably, the Scottish Government has shelved plans to reintroduce a public health supplement on larger retailers, which would have seen an additional business rates charge on those selling alcohol or tobacco products.
Wales
Businesses with properties in Wales will not face the same additional compliance obligations for its Welsh properties but there will be some more limited obligations such as a relevant tax reference number to HMRC.
The Welsh Government has recently consulted on reforming business rates in Wales.
The Welsh Government proposes that from 1 April 2026, there will be:
- a lower multiplier for "shops, kiosks or post offices" that have a rateable value less than £51,000; and
- a higher multiplier for all premises with a rateable value over £100,000 (with some exemptions e.g. for leisure centres and museums).
Although similar to the proposed new English model, the lower multiplier will only apply to a narrower group of outlets (shops and kiosks) and the threshold at which the higher multiplier will apply is much lower than proposed in England.
This highlights the growing disparity between different jurisdictions of the UK and the need for businesses holding a portfolio of properties to be aware of the differences and plan accordingly.
What's the takeaway?
The UK Government has opted for smaller tweaks to the business rates system in England rather than wholesale reform. Whilst there is a stated aim to redress unfairness in the system and level the playing field between the high street and online retailers, those with larger retail or hotel premises in England are likely to see an increase in bills from 2026. With increased compliance obligations, and different regimes in each jurisdiction of the UK, it is key that businesses are up to date with business rates obligations and they form an integral part of business and tax plans.
If you have any questions or would like to discuss any of these topics and what they mean for you and your business, please get in touch with our Consumer sector and Tax experts.
