Rate Relief
What the new Business Rates regime might mean for you
We’ve touched before here at Moving Tribes on Business Rates and their disproportionate impact on the retail and hospitality sectors.
In that post we discussed the fact that the retail sector, as an example, pays about 20% of the Business Rates bill whilst only being 5% of the economy, and also observed that Business Rates, as a tax you pay regardless of how well you trade, acts as a barrier to risk-taking and investment.
At the time, I suggested a number of options to make things better, including rebalancing the rates bill towards, for example, online retailers to better balance things, or considering replacing it altogether with a tax that better reflected economic activity in the modern era such as a tax on sales or profits (both of which, of course, already exist and could be adapted accordingly).
So what’s happened since then? Well, the good news is the government have acted - the Non-Domestic Rating (Multipliers and Private Schools) Act 2025 was passed into law in April and will take its effect in 2026, with the key rateable value multipliers being announced in the Budget in the Autumn.
The Government essentially took the first of the options I highlighted in that previous post. The essence of the new bill is to split Business Rates multipliers into three bands - one for very small sites (where current reliefs apply), the ‘normal’ rate and then a higher one for very large sites with a rateable value of more than £500k.
The idea is that the high rate on larger sites will hit those big online retailer warehouses, and allow a lower rate for ‘normal’ businesses operating on the High Street and elsewhere. The rates themselves will only be announced at the budget, but the bill sets some limits. The higher rate can’t be more than 10p above the normal one for example.
According to Savills, there are 16,780 properties in England that have rateable values of £500,000 or more, representing 0.84% of commercial properties but nearly 60% of the total rateable value.
On the face of it, then, this looks like a win for most businesses, at the expense of a few large ones.
Job done? Well, not when you read a bit more closely.
First of all, that 10% limit on the difference between the higher and normal rates really limits the potential impact even on regular businesses - if you start charging everyone (roughly) 55p in the pound for business rates, as is the case today for all but the smallest sites, then the biggest rebalancing you can do to raise the same money is to make it 59p for large sites and 49p for normal ones - better, for those smaller businesses, but not life-changing, I suspect.
And that is before the question of whether those 16,780 properties are all ones you want to tax at a higher rate. Tempting as it is to hope that they are all big online warehouses, this list includes offices, industrial sites, hospitals and more - a long list of special cases which will no doubt be lobbying hard for exemptions and reliefs. It would be odd indeed for the government, for example, to put more money into the health service only to take it back in the rates bill. Oh, and 20% of those sites are actually shops - the business rates bill on Regent Street, for example, will be going up too.
Fundamentally, then, the new bill will represent a pretty minor rebalancing and will leave businesses in the UK still essentially paying a lot of tax which is a function of the building they occupy rather than the trading that they do. It will remain a ‘deadweight’ cost for businesses that they have to pay regardless of market conditions or trading success. And the fact that the tax bill hits retail and hospitality businesses particularly hard will, although slightly improved, remain broadly the case.
The fight goes on, then. Increasing the taxes that businesses have to pay before they even start to trade (business rates, employers’ NI, pension reforms, the apprenticeship levy and others) makes it harder and less attractive to open a new location and makes businesses more and more vulnerable to downturns in trade.
Our sectors need to campaign, then, not for marginal reforms but for a complete revamp of how business is taxed. The government needs revenue from taxation but it also needs economic growth, and to achieve both of those together is going to require a fresh look.