A shake-up to business rates could bring a significant impact for landlords and tenants as the rateable values used to calculate a non-domestic premises’ rates liability change.
On 1 April 2026, a major business rates revaluation is being implemented, with changes to business rates multipliers and available reliefs.
The majority of rateable values are calculated by reference to market rent. Those businesses which have benefited from strong demand and rental growth since the last revaluation three years ago will therefore see the biggest increase. Industrial and manufacturing businesses are among the most impacted sectors, with warehouses, factories and distribution centres being disproportionately affected.
New, lower tax rates are being introduced for eligible retail, hospitality and leisure properties with a rateable value of less than £500,000. This is being funded by a new, higher tax rate on premises with rateable values of £500,000 and above – resulting in an end to the temporary relief previously applied to retail, hospitality and leisure premises.
What support is available for businesses?
It is good news for those premises who currently benefit from Small Business Rates Relief, as this will continue to be available for at least the next three years.
For businesses facing a large increase in bills following the revaluation, the government has set up a Transitional Relief scheme worth £3.2 billion. This will set caps on annual increases linked to a percentage of the increase and inflation over the next three years. The level of the cap depends on the rateable value of the premises. The cap will be automatic, and will be funded partly via a 1p supplement for businesses who are not eligible for the relief.
What steps can businesses and landlords take to prepare?
Rateable values are not just used to calculate business rates – they are also used to calculate the value of compensation that may be available to tenants when landlords oppose a renewal lease under the Landlord and Tenant Act 1954.
Where leases are due to expire within the next 12 months, landlords should review the current and future rateable values when determining when to serve notice under section 25 of the Landlord and Tenant Act 1954 opposing renewal. The amount of compensation which may be payable is linked to the date a landlord serves notice, or a counter-notice. Where rates are about to increase, the clock is ticking for landlords considering redevelopment or taking back possession for their own occupation to minimise the compensation payable.
Key takeaways
- Businesses can check their new rateable values for any premises they own now.
- For those eligible, no action is needed for businesses to benefit from the new Transitional Relief Scheme.
- For landlords looking to oppose a lease renewal, review the changes now to minimise compensation payable.
Looking to prepare and need a helping hand?
Get in touch and let our Real Estate specialists take it from here.
Please be advised that this is an update which we think may be of general interest to our wider client base. The insights are not intended to be exhaustive or targeted at specific sectors as such, and whilst we naturally take every care in putting our articles together, they should not be considered a substitute for obtaining proper legal advice on key issues which your business may face.