The Chancellor today announced a series of changes to the business rates levied on retail, hospitality and leisure (“RHL”) properties in a bid to “level the playing field” with online competitors. This includes a temporary 40% relief on bills for RHL properties and (yet another) freeze to the small business multiplier in 2025/26. The Chancellor has also promised to permanently cut business rates for RHL properties from 2026/27.
In its election manifesto, Labour pledged to “fundamentally reform the business rates system” to redress the unfair advantage online retailers benefit from as compared with high streets and town centres. Looking to deliver on this promise, the Chancellor announced the following measures:
1. 40% relief for RHL properties in 2025/6
For 2025-26, eligible RHL properties in England will receive 40% relief on their business rates liability, subject to a cash cap of £110,000 per business. There is limited information on the relief at this stage – other than that it will save the average pub with a rateable value of £16,800, over £3,300 in 2025. Although it seems generous on its face, the measure could potentially fall short of what many were expecting, especially as it is a reduction to the discount to rates that RHL properties currently enjoy (eligible RHL properties benefit from a 75% discount up to £110,000 per business for 2024/25, although the relief was set to end in 2025).
2. Frozen small business multiplier
Business rates are calculated by (a) multiplying the rateable value of the property by either the standard multiplier or the (lower) small business multiplier, and (b) subtracting any relevant reliefs. The multipliers usually increase with CPI, however the Chancellor today confirmed that the small business multiplier in England will be frozen at 49.9p for 2025/26. This is not a new measure – in fact, this is the fifth consecutive year that the small rates multiplier has been frozen!
It has been confirmed that the standard multiplier will be uprated by the September 2024 CPI rate to 55.5p.
3. Intention to permanently lower rates for RHL properties
The Chancellor also announced that there is an intention to permanently lower business rates for RHL properties from 2026-27. The Chancellor has not shed much light on the reliefs that are envisaged, but has highlighted that the largest cuts will be for THL properties that are currently subject to the small business multiplier by introducing a permanently lower multiplier (to be set at the Autumn Budget 2026).
But how will this be funded? The current intention is to fund this by increasing the standard multiplier (that is, the multiplier that applies to properties with a ratable value in excess of £500,000) from 2026/27. The Government suggest that the majority of this burden will therefore be borne by “large distribution warehouses, including those used by online giants”.
4. Further reform
The changes do not stop there – in the discussion paper published by the Government on the direction of travel for transforming the business rates system, the Government confirmed that it is looking for input from business on “the government’s initial areas of interest reform”. Further changes to the regime therefore seem imminent.