Business rates support, and why the glass is still half empty

“Is this it?” Shadow Chancellor Mel Stride has dismissed the government’s support for pubs, announced on Tuesday. Landlords and owners will make their own minds up, but the wider hospitality industry will certainly hope for more.   

The support announced by Rachel Reeves tries to soften the blow from business rates revaluations happening in April:   

• A 15% cut to new business rates bills from April  
• A two-year real-terms freeze in rates following this  
• A review of the method used to value properties for business rates  

Crucially, while pubs and music venues will receive help, there’s no additional support for hotels, restaurants or other hospitality and leisure businesses.   

Business rates reform was included in Labour’s manifesto in 2024. The government said it intended to reform business rates to create a fairer business rates system to protect the high street and support investment, while being fit for the 21st century.  

The first step was made at Budget 2024. It included a commitment to permanently lower multipliers for retail, hospitality and leisure businesses with properties valued under £500,000, funded by higher rates for properties valued at over £500,000. These new multipliers were announced at Budget 2025, along with further reforms to the business rates system. 

The recent Budget confirmed the new multipliers, which have resulted in the two existing rates being increased to five. These new rates will apply from 1 April 2026 

With the RHL multipliers set at 5p lower than their national equivalents, small and standard RHL properties will pay the lowest tax rate on the value of the business property since 1990/91 and 2010/11, respectively. 

That doesn’t mean they’ll pay less tax, however.  

Every three years, the Valuation Office Agency (VOA) updates the rateable values (RVs) of non-domestic properties to reflect changes in the property market. The next business rates revaluation will be on 1 April 2026 and is based on rental values from 1 April 2024, rather than a Covid-hit 2021. Consequently, even RHL businesses could face higher bills, despite the reduced multipliers. 

To complicate matters further, however, a redesigned transitional relief scheme that caps bill increases on revaluation will also come into effect, worth £3.2 billion. This transitional relief will be partially funded by a new transitional relief supplement, being an additional 1p on the tax rate for those who do not qualify for transitional relief or small business rates relief. This supplement will only apply for one year. 

Overall, at the time of the Budget, the OBR calculated that the impact of business rate changes would be “broadly neutral” by 2030/31. But within that, there will still be winners and losers. 

The new relief package for pubs sees further complexity, bringing an additional cut in bills, on top of any transitional relief.  

Most pubs will be better off. Those with a rateable value under £100,000 should see their business rates in 2026/27 fall: The transitional relief limits any rise to a maximum of 15%, and then the new support package reduces that bill by 15%, resulting in a net saving. 

Those with higher rateable values could still see their bills increase in 2026/27 – by up to 10.5% (an increase of up to 30% under transitional relief with a 15% reduction on the result). But even they will then significantly benefit from the second part of the new support package: the two-year real terms rate freeze. That prevents the further 25% real terms rise some would have otherwise seen.   

According to the government, the average pub will save £1,650 in 2026/27, and about three-quarters of pubs will see their bills fall or stay flat that year. The pub sector as a whole will pay 8% less in business rates in 2029 than they do currently, according to the Chancellor.  

The permanent lower multipliers for RHL properties with rateable values below £500,000 are welcome. This will hopefully provide these ratepayers with support and encourage investment back into the high street and local areas. 

With regards to the higher rate multiplier, this has been set at 2.8p above the national standard multiplier. The government had legislative flexibility to set the higher rate at up to 10p higher, so the 2.8p was lower than many anticipated. 

It had been rumoured that some properties, such as supermarkets, with a rateable value above £500,000 would still be exempt from the highest multiplier, but this came to nothing. As a result, larger properties will see a significant rise in their business rates bills, and this could make investment and expansion less attractive or feasible. 

The support provides some relief for pubs (and music venues) at least until 2029. They’ll be keen to see what comes of the valuation method review before then, though.   

For other hospitality businesses, though, there’s far less certainty – or comfort. UKHospitality calculates that the average hotel will see bills rising by £28,900 next year and by £111,300 by 2028/29.  

“The rising cost of doing business and business rates increases is a hospitality-wide problem that needs a hospitality-wide solution,” the group’s chair said, responding to the support package.  

“The reality remains that we still have restaurants and hotels facing severe challenges from successive Budgets. They need to see substantive solutions that genuinely reduce their costs.” 

The government has previously noted that transforming the business rates system is a multi-year process, requiring ongoing reform. It has confirmed that it will consider reforms beyond the Autumn Budget 2025, phased over the course of this Parliament.  

Its interim report in September 2025 set out several features of the business rates system that the government would consider reforming to improve its operation. It has now published a call for evidence, open until 18 February 2026, which seeks input on: 

• The tax structure - moving from a “slab” to a “slice” system 
• Small business rates relief 
• Improvement relief 
• Empty property relief 

The current slab system has been the topic of much debate. We would like to see this shifted to a progressive slice system, so that only the portion above each threshold is taxed at the higher rates, as exists for other taxes, such as income tax. This would mean that businesses only pay the higher multiplier on the value above £500,000. While this remains under consideration, we expect an influx of proposals to rateable values near to the £500,000 cliff edge. 

While we are generally supportive of the changes announced, the business rates system continues to grow in complexity. This is likely to lead to confusion, increased appeals against rateable values and additional administrative burdens for both local authorities and businesses.

For clarity and solutions, our specialist webinar looks at how to navigate the business rates and capital allowances changes as a result of the 2026 revaluation.

Likewise, our specialist business rates team can help you navigate through recent and proposed changes, challenge rateable values and budget for the future. Please get in touch with your usual S&W contact or one of the contacts listed.  

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