Labour’s Business Rates reform

The first Labour Budget in 14 years brought much anticipation, especially regarding potential business rates reform. The Government's plans to replace the business rates system in England with a fairer system were eagerly awaited.

However, the Autumn Budget and the Transforming Business Rates discussion paper, published on the same day, suggest that a complete overhaul is still far off. Instead, Labour's immediate measures are temporary fixes, such as reducing rates payments for retail, hospitality and leisure businesses, allowing more time to plan broader reforms.

Key Budget announcements include:

• A commitment to permanently lower business rates for retail, hospitality, and leisure (RHL) businesses with properties valued under £500,000 from April 2026, funded by higher rates for properties over £500,000. The Government has yet to confirm if this will apply to all properties valued at over £500,000 or just to certain asset sectors, but care will be needed to not adversely impact larger businesses that are anchor tenants in our town centres
• Extension of RHL rate relief for the 2025/26 rates year, though the discount will reduce from 75% to 40%, with a £110,000 cap across all properties
• Freezing the small business rates multiplier at 49.9p and increasing the standard multiplier to 55.5p for the 2025/26 rates year, commencing 1 April 2025
• Removal of charitable rate relief for private schools operating as charitable trusts from April 2025, except for those primarily providing full-time education to pupils with an education, health and care plan

The Transforming Business Rates discussion paper also outlines plans to:

• Introduce a general anti avoidance rule (GAAR) for business rates to tackle abuse of the empty property rates relief system
• Potentially reduce the antecedent valuation date (AVD) to one year prior to the revaluation date. Business rates are based on property values at a specific point in time, known as the antecedent date
• Currently the antecedent date is two years prior to the revaluation date
  Increase the frequency of revaluations from every three years to annually, though this will require additional capacity within the Valuation Office Agency (VOA)
• Start the roll out of the ‘duty to notify’, as outlined in the Non-Domestic Rating Act 2023, from 1 April 2026, with full implementation by 1 April 2029. This duty requires rate payers to update property information in real time, aiming to reduce the valuation officer's workload during the check, challenge, appeal (CCA) process. There are concerns about the feasibility for large occupiers with multiple properties to meet these requirements within the mandated timescales

The Government acknowledges the business rates system is not fit for purpose in the digital age and commits to the digitalising business rates (DBR) programme by March 2028. This programme will centralise records of 296 billing authorities, providing extensive property and financial information to support better business rates policies and identify tax avoidance.

It is welcome news that the Government intends to consult with business rates professionals and rate payers to improve the system, though substantial changes are likely to take longer than one Labour term. Initial implementation of the duty to notify is 18 months away, and not expected to be fully mandated until 2029, and the digitalisation programme is not on the horizon until 2028. While the discussion paper marks progress, creating a fairer Business Rates system will require time and further stakeholder consultation to support growth and resilience across sectors.

If you would like to discuss this further, please contact Jessica Gallagher, Colette Henshaw, or your usual contact.

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