Labour came into Government with a manifesto commitment to “replace the business rates system, so we can raise the same revenue but in a fairer way.”
The manifesto went on to claim, “the new system will level the playing field between high street and online giants, better incentivise investment, tackle empty properties and support entrepreneurship.”
Six months on from the election, we look at the changes announced by the Chancellor in her Budget, the likely impact of next year’s 2026 revaluation, and answer whether the Government is delivering its promises.
2024 Budget Announcements
The Chancellor announced several taxation increases, with many falling on business. These tax increases, including Employer National Insurance and Capital Gains Tax, will have a much larger impact than any changes concerning business rates.
The Government published a supplementary paper “Transforming Business Rates” alongside the Budget, which highlights several changes to business rates
Many of the Budget announcements will be effective after the 2026 revaluation. The new discounted RHL multipliers and “High” Multiplier will be set once the Government has analysed the new 2026 rateable values.
2026 Revaluation Impact
The purpose of revaluations is not to raise additional tax revenue for the Government, but rather to apportion tax liability according to how rental values change. The Government views shifting rental values as a proxy of ability to pay, or affordability for ratepayers. The Valuation Office Agency (VOA) is currently valuing every non-domestic property across England and Wales for the 2026 revaluation. The 2026 rateable values will be equivalent to the annual rental value of the property on 1 April 2024. Meanwhile, the existing 2023 rateable values reflect rental values on 1 April 2021.
The change in rental values will determine how rateable values shift at the 2026 revaluation. To ensure total revenues remain the same in real terms following a revaluation, the multipliers applied to rateable values to determine liability are rebased at revaluation.
Our research suggests that total rateable value in England will increase by 10.5% to £79.3 billion in 2026. Retail will see an overall fall of rateable value by 1.8%, while Logistics & Industrial will see an increase of 28.6%. Offices will see a below average rateable value increase of 8.7%, and ‘other’ sectors will see an increase of an average of 5.9%.
In Wales the impact follows a similar pattern. Total rateable value will increase by 4.1%. Retail will see a 0.3% fall, and Logistics & Industrial the largest rateable value increase at 11.1%. Offices will increase by 0.8%, while the ‘other’ sector will increase by 3.3%.
Logistics & Industrial has seen strong rental growth due to sustained occupier demand and an imbalance between the levels of demand and available supply. While our research into the revaluation impact focuses on sector and regional averages, rateable values at property level are likely to vary significantly and impact liability accordingly.
Rebased Multipliers
The Chancellor confirmed that the 2025/26 small multiplier will be frozen at 49.9p. However, the 2025/26 standard multiplier will likely increase to 55.5p in line with September 2024 CPI of 1.7%.
Total rateable value in England will increase by 10.5% following the 2026 revaluation. Consequently, the Government should confirm a similar reduction of multipliers in 2026/27 before adjusting according to inflation in September 2025.
Given the expected rateable value changes and an assumed inflation rate of 2%, we estimate that the 2026/27 small multiplier will fall to 45.5p. Meanwhile, the 2026/27 standard multiplier will be reduced by 8.7% to 50.7p. Similarly in Wales, the 2026/27 multiplier should fall by 2.2% to 55.9p.
Our analysis reflects the rebased multipliers above. However, the Chancellor announced that lower multipliers will be introduced in England for Retail, Hospitality and Leisure (RHL) properties whose 2026 rateable value is below £500,000. RHL properties whose rateable value is less than £51,000 will have the lowest multiplier, while rateable values between £51,000 and £499,999 will also benefit from a discounted multiplier.
To fund the lower multipliers for RHL properties, a new high multiplier will be introduced for all properties whose 2026 rateable value is £500,000 and above. Details of the lower and high multipliers will be confirmed in the 2025 Budget once the Government has analysed the new 2026 rateable values.
Rates Liability Change
The lower 2026/27 rebased multipliers offset some of the liability increases caused by higher 2026 rateable values. Meanwhile, Retail has a double benefit of falling rateable values and lower multipliers driving down rates liability.The largest liability fall following the revaluation will be in the North East ‘Other’ sector at 14.9%, and East Region Retail at 13.5%. The biggest increases are all Logistics & Industrial within the North West (25.5%), London (24.2%) and West Midlands (21.6%).
Is the Government Delivering?
Both the 2026 and 2029 revaluations were recognised in the Budget, potentially signalling that the Government has no serious intention of replacing business rates.
The existing business rates system of using revaluations to apportion liability according to shifts in rental values is working. Historically, the Retail sector had the highest total rateable value and corresponding liability of any sector but had failed to see the required adjustment in liabilities relative to significant structural changes in occupier market fundamentals. This began to change in 2023 when Retail became the lowest value sector and will reduce further in 2026.
To some, the Budget announcement signal an intention to support the Retail sector and its contributing jobs, albeit these rate savings come further down the line for many occupiers with more immediate concerns around higher National Insurance contribution costs.
The Logistic & Industrial sector will become the highest total rateable value and consequent liability sector at the 2026 revaluation. It is too soon to see whether this additional occupation cost will impact the markets. The occupational market has remained muted in recent years owing to macroeconomic pressures, and concerns around affordability in some regions has seen levels of occupier requirements fall.
Meanwhile, the Office and Other Sectors total value – and hence share of liability – will also increase compared to Retail, but not to the same extent as seen in Logistics & Industrial.
Better Incentivise Investment, Tackle Empty Properties and Support Entrepreneurship
The forthcoming changes to business rates provide some clear signals of intent. Overall, business rates are a relatively small contributor to both public sector revenues and Government strategy.
Is the Government delivering its manifesto pledges? In our view, no, but we are unsurprised that it is tinkering with business rates to attempt to deliver some of its promises. However, tinkering inevitably leads to an ever more complex and opaque taxation system. And for every well-intended beneficiary there will be other ratepayers whose liability increases.
Click here to download our full Decoding Business Rates summary.
