Budget 2025: a status-quo Budget for Business Rates

Despite significant anticipation around business-rates reform, Vail Williams reports the Autumn Budget delivered only a brief mention, and very limited new detail.

For landlords, occupiers and investors, the message of the Budget is largely one of continuity rather than change.

Many of the Government measures were confirmation of previously trailed measures rather than delivering substantive fresh business rates reforms.

Permanent retail, hospitality & leisure rating cut welcome

The main Business Rates announcement in the Budget, was confirmation of a permanent rates cut set to benefit more than 750,000 retail, hospitality and leisure (RHL) businesses.

Adam Barnfield, partner and head of Business Rates (pictured), said: “Although the Budget speech offered scant detail, this is expected to be delivered through the proposed new lower business-rates multiplier for RHL, which would represent the lowest multiplier since 1991, according to the Chancellor.

“For high-street businesses and hospitality operators, this provides welcome stability and a reduction in ongoing occupational costs. This may also help support occupancy levels on the high street and investment in local town centres.

New ‘super multiplier’ for high-value properties

The cost of the permanent RHL support will be offset by a new ‘super multiplier’, applied to properties with a rateable value (RV) above £500,000.

This enhanced band will capture:

  • Large offices
  • Large industrials
  • Online warehouse/fulfilment centres

Whether properties, such as out-of-town retail, major leisure and educational will be exempt, is still yet to be determined.

“For occupiers of high-value commercial assets, particularly those in the industrial, warehousing and logistics sector, today’s announcement confirms what was expected – that business rates liabilities will rise significantly from 2026 onwards.

“This will be cause for concern for businesses operating from these larger industrial premises, and we await the publication of the Draft Rating list to find out more,” said Adam.

£4.3bn Transitional Relief package nothing new

The Chancellor also confirmed a £4.3 billion package to support ratepayers facing significant increases at the next revaluation.

Adam explains: “This is simply a continuation of the existing Transitional Relief Scheme, originally introduced as a temporary measure many revaluations ago, and now an entrenched feature of the system.

Transitional relief is designed to limit how much a business’ rates bill can increase in any one year after a revaluation. It phases changes in gradually.

If a property’s rateable value jumps significantly in the 2026 Rating List, transitional relief prevents the occupier from suddenly having to pay the full, higher bill in year one. Instead, the increase is capped and spread over several years.

Adam states: “While transitional relief will help soften the sharp increases in liability post-2026, it also serves to prolong the distortions within the system and delays convergence to true liability for some occupiers.”

A status-quo Budget

Business Rates received a passing mention in the Chancellor’s speech, with no surprises, no acceleration of reform, and almost no substantive commentary. It was effectively a status-quo Budget for business rates.

For the commercial property sector, the message is clear: the long-term overhaul many stakeholders had hoped for has not materialised, and today’s measures simply reaffirm the direction already set through the 2025 legislative changes.

More detail is expected once the draft 2026 Rating List is published imminently, including the actual multipliers for 2026–27.

Wider property taxation: a ‘mansion tax’ in all but name

While non-domestic rates saw little new movement, the Budget did introduce a significant development on the residential side. A council-tax surcharge for high-value homes, effectively amounting to a form of mansion tax.

The surcharge will apply to properties in Bands F, G and H after a fresh revaluation, with the following annual charges:

  • £2,500 surcharge for homes valued £2.5m–£10m
  • £7,500 surcharge for homes valued above £10m

This raises a number of important questions for homeowners, developers and advisers alike.

Who will carry out the valuations?

Head of valuation for Vail Williams, Stephen Hobbs, said: “The latest information suggests that the valuation will be carried out by the Valuation Office Agency (VOA) to reflect values in 2026, but as yet, we have no more detail than that, and will monitor developments.

“One question that does arise though, is whether or not the VOA can cope with the additional workload this would inflict or would it need to be outsourced? Finally, what will the appeal process look like?”

It remains unclear whether existing council-tax banding procedures will apply or whether a new appeal mechanism will be introduced. This will attract intense scrutiny, especially for properties near the thresholds.

Threshold effects and valuation ‘cliff edges’

The surcharge creates strong threshold sensitivities. Properties valued just above £2.5m or £10m could incur thousands of pounds more in annual tax compared with those marginally below. This is likely to fuel significant interest in valuation detail and potentially a large volume of appeals challenging banding assessments.

Market implications

Depending on the valuation methodology adopted, these changes could affect buyer behaviour, negotiations, and even refurbishment decisions, particularly in London and the South East where many properties sit close to the relevant thresholds.

At present, no timetable or valuation approach has been confirmed, leaving notable uncertainty for stakeholders.

With the draft 2026 Rating List expected shortly, far more detail will emerge on:

  • Updated rateable values based on April 2024 valuations
  • Confirmed multipliers for 2026–27
  • Transitional relief mechanics
  • Geographical and sector-specific impacts

This will provide the real clarity businesses need to forecast future occupational costs and make informed investment decisions.

Vail Williams will provide further analysis as more information becomes available, including sector-specific breakdowns and regional commentary from rating specialists across the UK.

If you would like a tailored review of how these changes could affect your property, portfolio or leased estate, contact the business rates team.

Disclaimer
The information contained in this article is provided for general information purposes only and reflects the position at the time of publication. While every effort has been made to ensure the accuracy of the information, subsequent changes in legislation, case law, or policy may affect its validity. This article does not constitute legal advice, nor should it be relied upon as such. Readers are advised to always seek specific guidance in relation to their individual circumstances before taking or refraining from any action based on the contents of this publication.

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