The UK Government’s September 2025 Transforming Business Rates Interim Report marks an important step toward reshaping a system widely seen as outdated and unfit for today’s economy. It builds on extensive consultation with stakeholders, including businesses, trade bodies and local authorities, which have consistently argued that the current system acts as a barrier to investment.
Scale of Consultation
Ahead of the discussion paper, the Government hosted 20 roundtables with 261 participants and received 161 written submissions from 230 organisations across real estate, retail, leisure, airports, infrastructure, SMEs, and local authorities. Feedback was clear: while business rates remain a vital funding stream for local government, the framework is inflexible, burdensome, and discourages growth.
Why Reform is Needed
Recurring themes from stakeholders included:
- Barriers to investment – Improvements and expansions trigger higher tax bills, deterring businesses from upgrading or growing.
- High tax burden – Current multipliers (49.9p for small properties; 55.5p for standard) are widely seen as unsustainable, with calls to return to levels last seen in the early 1990s.
- Uncertainty – Businesses face unpredictable revaluations, inconsistent reliefs, and lengthy appeal processes.
- Lack of transparency – Calls were made for clearer valuation methodologies and more efficient engagement with the Valuation Office Agency (VOA).
- Small Business Rates Relief (SBRR) – Broad support for continued SBRR but with uprated thresholds and removal of the single property rule, which creates a ‘cliff edge’ that discourages expansion.
- Improvement Relief (IR) – Many argued the current 12-month relief is too short, with suggestions to expand eligibility (e.g. landlords, sustainable improvements) and address the occupation condition.
- Empty Property Relief (EPR) – Strongly divisive: local authorities want stricter conditions to tackle avoidance, while property owners/agents argue for more generous terms during refits or tenant voids.
- Uncertainty and Appeals – Concerns about revaluations and the slow, burdensome Check, Challenge, Appeal (CCA) system. A majority supported shortening the Antecedent Valuation Date (AVD), though not necessarily more frequent valuations.
- Permanent Rate Cuts for High Street Sectors – From April 2026, retail, hospitality and leisure properties with a Rateable Value under £500,000 will benefit from reduced rates, funded by higher multipliers on larger properties.
- Slab-to-Slice Reform – Moving from a single-rate system to marginal bands, similar to income tax, to prevent sudden liability jumps when thresholds are crossed.
- SBRR Reform – Options include raising thresholds and removing the single-property restriction to reduce cliff-edges.
- Improvement Relief – The Government will review data to explore extending relief periods and eligibility.
- Empty Property Relief – Further consultation is planned given the split views.
- Transitional Relief – A package to smooth large bill increases at the 2026 revaluation will be confirmed at the Autumn Budget 2025.
- Receipts & Expenditure Methodology – Concerns raised will be reviewed ahead of the 2029 revaluation.
- Administrative Reform – The merger of the VOA with HMRC by year-end aims to create a more joined-up, efficient system.
- Lower costs and greater certainty for SMEs and high street operators.
- A fairer, more proportionate structure that supports growth.
- A better balance between funding local services and encouraging investment.
