The Treasury has today launched a review into how business rates are calculated for pubs and hotels in England and Wales, potentially opening the way for significant reform ahead of the next revaluation in 2029.
Led by UK business rates expert Jerry Schurder, the review will examine whether the current valuation methodology fairly reflects the operating realities of hospitality businesses. The Treasury will be inviting evidence from landlords, hoteliers, pub operators and other business owners, with findings expected by March 2027.
Business rates are a significant overhead for hospitality operators, many of which are already managing rising employment, energy, food and supply costs. The British Beer and Pub Association (BBPA) reported that 161 pubs closed across England, Scotland and Wales during the first three months of this year, resulting in approximately 2,400 job losses. Although business rates are not the only pressure facing the sector, industry representatives say that rising property costs are contributing to the financial strain.
The review follows quickly on the heels of Andy Burnham’s announcement of a 20% business rates cut for pubs, social clubs and live music venues in England from April 2027. That reduction is expected to save a typical pub around £1,100 a year, although hotels, restaurants and other hospitality businesses have raised concerns about being excluded from the support.
The Fair Maintainable Trade (FMT) debate
A central issue will be the use of Fair Maintainable Trade (FMT) to assess pubs for business rates.
Unlike many retail properties, which are generally valued with reference to factors such as location, size and market rental evidence, pubs can be assessed partly on their trading potential. As a result, a stronger turnover may contribute to a higher rateable value and, consequently, a larger business rates bill.
The BBPA argues that this approach can leave pubs paying disproportionately high rates. Jonathan Lawson, chief executive of Butcombe Group, described the system as effectively “punishing success”, particularly when compared with large online retailers whose warehouse rates are generally based on estimated market rents rather than revenue.
This comparison highlights a broader question for policymakers: should business rates reflect the income generated from a property, or should they be based primarily on the property itself?
While the review has been welcomed by hospitality organisations, several business groups believe the government should take the opportunity to examine the wider business rates system.
The Federation of Small Businesses (FSB) has called for a higher threshold for small business rates relief, which could remove more smaller firms from the system altogether. The British Chambers of Commerce has also warned that businesses across all sectors are struggling with a complex and outdated framework, and that a narrower review of valuations may not go far enough.
Changes to valuation methodology may affect how trading performance, location, property configuration and operating potential are reflected in future rateable values. However, any changes arising from the review are not expected to affect the current 2026 rating list, but likely to feed into the next revaluation in 2029.
What property owners and operators should do
Although the review will take time, hospitality businesses should not wait for the outcome before assessing their current position.
Owners and occupiers should consider:
• Reviewing the basis on which their property has been valued.
• Checking whether the current rateable value reflects the property’s physical characteristics and trading circumstances.
• Monitoring eligibility for announced reliefs and future support.
• Maintaining accurate trading and property records.
• Taking professional advice before submitting evidence or challenging a valuation.
• Preparing for possible changes to valuation methodology ahead of the 2029 revaluation.
A potential turning point?
For pubs, hotels and other hospitality operators, the outcome could influence future liabilities, investment decisions and property values. However, with concerns extending well beyond valuation methodology, the pressure on government to deliver a wider business rates reform package is likely to remain.
At Dunlop Heywood, we are experts in helping property owners and occupiers in the hospitality and leisure industries to understand business rates liabilities, assess valuation evidence and identify opportunities to manage their exposure.
If you own or operate a pub, hotel or hospitality property, contact Dunlop Heywood to discuss how the current review and future revaluations could affect your business.
