The business rates system taxes the value of properties used for business, providing a stable source of government revenue to support essential local services like social care.
However, property-intensive sectors bear a larger share of the tax burden, which disincentivises high street investment and provides fewer opportunities for local communities.
The Labour government is planning to reform business rates over the next few years to help high street businesses and give this area of economic activity a much-needed boost.
While business rates relief has been extended for the retail, hospitality, and leisure sectors, with the current discount dropping from 75% to 40% next year, many businesses in England could see their business rates bill almost double in 2025–2026.
So, what are the government’s plans to reform business rates and tax reliefs, and how is this supposed to help English businesses? Learn more about the incoming changes below.
Business rates in 2025–2026
Retail, hospitality, and leisure (RHL) properties that don’t qualify for small business rate relief (for property values below £15,000) receive a discount of 75% on up to £110,000 per business.
While this will continue in the 2025–2026 tax year, the discount will be cut to 40%. Properties usually qualify for this business rates relief if the business is primarily a shop, restaurant, café, bar, pub, cinema, music venue, gym, spa, or hotel.
While businesses will be relieved that the discount isn’t stopping altogether, they will no doubt still be disappointed by the significant decrease.
A business rates bill is calculated by multiplying the property’s rateable value by a multiplier. The government intends to protect smaller properties by freezing the small business multiplier (for property values below £51,000) at 49.9p, helping over a million businesses.
By continuing to provide a business rates discount instead of removing it altogether on 31st March 2025, as planned by the previous government, this will save the average pub with a rateable property value of £16,800 more than £3,300 in 2025.
However, the standard multiplier (for property values of £51,000 and above) will be uprated from 54.6p to 55.5p, which will likely disappoint businesses in this bracket.
Business rates in 2026–2027
As announced in the Autumn Budget, the government will take steps to implement a fairer business rates system by introducing permanently lower multipliers for RHL properties with rateable values below £500,000 from April 2026.
This permanent reduction will be sustainably funded by implementing a higher multiplier for RHL properties with rateable values of £500,000 and above, which includes most large distribution warehouses used by giant online retailers.
The rates for the new multipliers are currently unknown but will be set in next year’s Autumn Budget, following revaluations and consultations with businesses and stakeholders.
The government will be consulting on other potential reforms, too, such as areas where ‘cliff edges’ in the system disincentivise businesses in England from expanding.
There are no details so far of discounts for business properties in Scotland, Wales, or Northern Ireland, though RHL properties in Wales benefit from a 40% discount at present.
Details of the business rates reliefs in England are explained on the government website.
If you are a small to medium business owner with concerns about how these changes could affect your property taxes, our accountants in Barnsley can provide professional advice.
To find out how gbac can help you with business tax reliefs, contact our team by calling 01226 298 298, or send an email to info@gbac.co.uk and we will be back in touch soon.