The government’s business rates reforms unveiled in the Budget have drawn the ire of the wider property sector, with one expert claiming the plans will "put growth in jeopardy".

The chancellor of the exchequer leaves Downing Street to deliver the Budget. Credit: Picture by Simon Walker / HM Treasury

Plans to lower rates for properties with a rateable value below £500,000 have been public for over a year; however, today (26 November) the government unveiled the new multipliers as part of the Autumn Budget.

The retail, hospitality and leisure (RHL) multipliers will be 5p below their national equivalents, making the small-business RHL multiplier 38.2p and the standard RHL multiplier 43p in 2026-27.

Small and standard RHL properties will pay the lowest tax rate since 1990-91 and 2010-11 respectively under the changes, the government claimed.

To fund this, the government is introducing a higher rate for properties with rateable values of £500,000 at 2.8p above the national standard multiplier. The high-value multiplier will be 50.8p in 2026-27.

“This poorly targeted tax change will hit the same high-productivity sectors that are at the heart of the industrial strategy and critical for driving economic growth,” said Ion Fletcher, policy director at the British Property Federation.

“Business rates are a major contributor to the UK having the highest level of property taxes in the OECD [Organisation for Economic Co-operation and Development], which is completely at odds with the aim of getting Britain building.”

Fletcher said the reforms were not a targeted tax on online retailers, as marketed by Labour. Instead, the plans to alleviate the burden on smaller businesses masked a 4.9% total increase in the rates burden this year and massive 10.2% hike for the next financial year “that will put jobs and growth across the country in jeopardy”.

He added: “It will hit all businesses in larger, high-value buildings including manufacturing, life sciences and logistics businesses in warehouses, as well as financial and professional services based in modern office space.”

The government has also said that its policy is to target the large distribution warehouses, yet of the 21,000 businesses facing the higher multiplier only 1,900 are distribution warehouses and a fraction are online retailers.

John Webber, head of business rates at Colliers, said: “By this action the government has effectively shifted the cost of this support from itself to UK plc, putting an even further strain on businesses across the board- and putting even further pressure on the high street since it is the big retail and leisure operators who provide anchor tenants, encourage footfall and create the jobs. Tesco, Asda and Sainsburys all have at least 90% of the properties in the higher multiplier range.

“Such increased costs are effectively a stealth tax and will only lead to food inflation. It will do nothing to stimulate investment and expansion. Far from reducing business rates they are on the way up.”

James Craddock, UK managing director, SEGRO, said he was “concerned” by the changes. “This will levy an additional tax burden on businesses in large industrial buildings across the country, including our customers in retail, manufacturing, data centres, life sciences and other key industrial strategy sectors, and will impact on inward investment and growth,” he added.

“It will add to the operational cost pressure employers are already feeling as a result of last year’s National Insurance increase as well as high energy costs.”

Paul Weston, Prologis UK regional head, said: “Raiding business rates on commercial properties is somewhat of a blunt instrument. It’s clear what the chancellor is trying to achieve, but the reality is that there are lots of businesses beside e-commerce operators that this change will really catch out, including manufacturing.

“Whilst the industrial logistics sector across the country will be impacted, occupiers in London and the south-east will be disproportionately hit, due to high rateable values compared with other areas. Ultimately, creating extra occupational costs will risk raising prices – and therefore inflationary pressures – potentially affecting other options like staff recruitment.”

Nik Moore, head of business rates at Rapleys, said the “one-size-fits-all” approach to the rateable value threshold “will doubtless mean pain is widely felt, and will contribute to additional inflation”.

Simon Berkley, partner, business rates, at Knight Frank, highlighted the fact the government refused to exempt retailers from the new levy on large properties. “This will have a direct impact on supermarkets that had been lobbying for a reprieve,” he said.

The reforms have, however, been welcomed by parts of the retail, hospitality and leisure sectors, with more than 750,000 properties set to benefit from the lower rates to the tune of nearly £900m a year. Kay Buxton, chief executive of the Marble Arch London Business Improvement District (BID), said the BID was “delighted” that the chancellor had recognised the pressure the sector is under.

HOLBA chief executive Ros Morgan said: “We welcome the budget in parts, but it doesn’t fix the structural issue of business rates and instead offers a series of short-term sticking-plaster solutions.

“Government promised a fairer system that levels the playing field with online businesses whilst reviving our high streets. This allows us to continue our conversation with the treasury about HOLBA’s combined business rate solution which promotes a modern system that reflects today’s digital economy, not yesterday’s.”

HOLBA’s proposed combined business rate would introduce a 2% levy on online sales, excluding financial services and sales that drive people into towns and city centres raising an estimated £6bn, enabling a 40% cut in business rates for all, the organisation said.

Ahead of the Budget, more than 60 UK serviced office providers banded together to warn chancellor Rachel Reeves that the reforms posed an “existential threat” to their businesses.

“London’s flexible workspace sector is going to be strangled by an outdated tax policy that will reduce the city to Covid levels of decline,” said Niki Fuchs, co-founder and chief executive of London flexible office provider Office Space in Town.

“Introducing a higher rate of payment for offices worth over £500,000 will simply make high-quality office space inaccessible to smaller businesses, entrepreneurs and start-ups – the very businesses that the chancellor claims to support.”

The government also unveiled a support package worth £4.3bn over the next three years to support businesses facing increased rates, including a £3.2bn transitional relief scheme for the largest ratepayers, including airports and hospitality firms.

The reformed business rates system will raise £3.5bn more next year, a 10.4% increase in yield, according to global tax firm Ryan.

“This sharp rise reflects CPI uprating, structural changes in the tax base and the withdrawal of temporary Exchequer-funded support for RHL,” said Alex Probyn, practice leader, Europe and Asia-Pacific property tax, at Ryan.

“It occurs alongside the creation of five new multipliers from April 2026 and the most significant rebalancing of the system in over three decades.”

The five new business rates multipliers set at the following levels:

• Small business RHL multiplier -RV below £51,000 (RHL): 38.2p
• Standard RHL multiplier RV between £51,000 and £499,999 (RHL): 43p
• National small business multiplier RV below £51,000 (non RHL): 43.2p
• National standard multiplier RV between £51,000 and £499,999 (non RHL): 48p
• High value multiplier RV £500,000 and above (all properties) 50.8p