Business rates after the Budget: What's really changed for high-street businesses?

For once, business rates weren't just a footnote in the Budget.

In her Autumn Budget on 26 November, the Chancellor used business rates as one of her main levers to show she's "backing the high street" and "rebalancing" the tax burden away from small shops, pubs and cafés and towards larger commercial sites.

While this significantly resets the system for retail, hospitality and leisure (RHL) businesses, it also falls short of the full "replacement" of business rates Labour promised in opposition. And for many pubs, hotels and restaurants, it still feels like a stealth tax.

This blog traces how we got here, what's actually changed, how it compares to previous promises and what it means in practice for the UK's small business owners.

Where we've come from: Temporary relief and rising pressure

Business rates are based on a simple formula: the property's rateable value (RV), set by the Valuation Office Agency, multiplied by a tax rate, known as the multiplier.

Under the previous Conservative government, the basic structure stayed in place, but the pandemic forced a series of temporary fixes for RHL businesses:

• 2020/2021: 100% business rates relief for eligible retail, hospitality and leisure premises.

• 2021/2022 and 2023/2024: Relief tapered down, then stabilised at 75% for 2023/2024 and 2024/2025, up to a cash cap of £110,000 per business.

This kept many high-street firms afloat, but it also created an annual cliff-edge. Every Autumn Statement, RHL businesses waited to see whether the government would extend, reduce or withdraw relief for another year.

By 2024, the government had confirmed that in 2025/2026 the RHL business rates relief would fall again to 40%, still with a cash cap, then replaced by a different structure from 2026/2027 onwards.

At the same time, a three-yearly revaluation cycle had been set. The next revaluation is due to take effect from April 2026 and will be based on 2024 market values.

Because the last full valuation was carried out in the middle of the pandemic, many RHL properties are now seeing sharp upward adjustments in their RV, reflecting the post-COVID recovery in trade and rents.

So even before this year's Budget, high-street businesses were facing a double squeeze: temporary relief coming to an end and a revaluation that would lock in higher RVs.

What Labour promised: "Replacing" business rates

In opposition, Labour vowed to go further than tweaking relief. Its 2024 general election manifesto committed to "replacing the business rates system" with something that raised the same revenue but was "fairer" and did not put "an undue burden on our high streets".

That set expectations quite high. Many business groups and high-street advocates read "replace" as a promise of wholesale structural change, not just re-banding and permanent relief.

Autumn Budget 2024: A "forward look"

In reality, the new government's first major move on business rates came in the Autumn Budget of 2024, which flagged a more incremental approach.

Three new multipliers were to be introduced from 2026/2027: two for RHL properties with RVs below £500,000, and a higher multiplier for properties with an RV of £500,000 or more.

The 2024 documents stopped short of fixing exact rates, but they signalled that:

• RHL properties with an RV under £500,000 would get permanently lower multipliers

• these lower multipliers would be funded by a higher multiplier on properties with RVs of £500,000 and above

Crucially, this wasn't a replacement of the business rates system. It was a redistribution within the existing structure, plus a promise of greater certainty.

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What the 26 November 2025 Budget actually did

The 2025 Budget locked in the detail that had been trailed the year before and added a large transitional support package.

From 1 April 2026 in England, there will be:

• two permanently lower multipliers for RHL properties with RVs under £500,000:

  • small business RHL multiplier: 38.2p in 2026/2027

  • standard RHL multiplier: 43p in 2026/2027

• a higher "high-value" multiplier for properties with RV £500,000 or more, set at 50.8p in 2026/2027, 5p above the national standard multiplier

These lower RHL multipliers replace the temporary 40% RHL relief that applies in 2025/2026 (with a £110,000 cash cap).

The Treasury is explicit that the old relief model, rolled over year after year since COVID, had "an annual cliff-edge" and caused unnecessary uncertainty.

The HMT factsheet: What's underneath the headlines

The Budget 2025: Retail, Hospitality and Leisure factsheet, published alongside the Budget, sets out the logic and the numbers in more detail. Here are some of the key points:

Revaluation and rising RVs

Properties are revalued every three years. The next list, taking effect from April 2026, uses 2024 values.

The previous list was struck during the pandemic, so many RHL businesses are now seeing large RV increases as their trade and rents recover.

Why multipliers can fall

Because RVs are higher, the government can reduce the multipliers while keeping overall revenue broadly stable.

For small RHL properties, the tax rate will be the lowest since 1990/1991. For other RHL properties under £500,000, it's the lowest since 2010/2011.

Scale and targeting of the tax cut

The Treasury describes this as a permanent tax cut worth "nearly £900 million per year", benefiting more than 750,000 RHL properties.

Unlike the current relief scheme, there is no cash cap. Any qualifying RHL property below the RV threshold can benefit in full.

Who pays instead

The cut is funded by higher rates on the top 1% of the most valuable properties.

Large distribution warehouses and similar sites are expected to pay around £100 million more in 2026/2027, with this funding used to reduce bills for in-person retail.

Does this deliver on Labour's promise to "replace" business rates?

On the broader political promise to "replace the business rates system", this is at best a first step, not a fulfilment:

• The core model of tax based on RV × multiplier remains intact. There is more banding and differentiation, not a fundamentally new tax.

• Business rates revenue is still forecast to rise over the decade, from around £37 billion in 2026/2027 to £42 billion by 2030. This undercuts the idea that high-street businesses as a whole will see a sustained reduction in the overall burden.

So, the government has delivered a meaningful redistribution within the existing framework, but not the system-wide replacement some in business and local government were hoping for.

How businesses are reacting: Relief, anger and "stealth tax" claims

Reactions have been split along fairly predictable lines.

Retailers and investors initially reacted with something close to relief. Retail shares ticked up after the Budget, in part because the measures were "not as bad as feared" and did deliver permanent rate cuts for many high-street premises.

But, hospitality industry figures have been blunt. The changes have been described as "one of the biggest stealth taxes that hospitality has had for many, many years".

Some pub and restaurant operators say they feel they've been "lied to" once they run their own numbers through the government's calculator.

A number of trade bodies and advisers argue the reforms make the system more complicated without addressing deeper issues, such as high effective tax rates in prime locations and the imbalance with online-only business models.

The bottom line

The 2025 Autumn Budget marked a clear break with the emergency-relief era.

For many small high-street businesses, permanent lower multipliers and transitional caps are a step towards a more stable and predictable system.

But this isn't the wholesale replacement of business rates that was trailed in opposition.

The core architecture remains in place, the overall tax take is still projected to rise and, for many in hospitality in particular, the reforms feel like a rebadged tax rise rather than a rescue.

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