The Government has published an interim report, 'Transforming Business Rates', summarising how it plans to improve the operation of the business rates system in England.
This follows the Discussion paper published in the Autumn Budget 2024, which set out the Government's intention to reform the business rates system to:
- Incentivise investment and growth.
- Support the high street with a fairer system.
- Make the system fit for the 21st century.
The Interim report summarises feedback from 230 organisations and 161 written submissions.
- There was a strong consensus that the current system discourages investment, especially when property improvements or expansions lead to higher rates.
- Respondents called for greater predictability in future rate liabilities to support long-term planning.
- Support for lower tax rates was evident, with some suggesting a return to 30-35p multipliers (currently 49.9p for small and 55.5p for standard properties).
Common areas for improvement raised by stakeholders were:
- 'Slab' to 'slice' reform: moving from the current structure (where a single multiplier is paid on the Rateable Value (RV)) to a new structure based on a marginal rate, similar to Income Tax, to reduce investment disincentives.
- Small Business Rates Relief (SBRR): increase the RV threshold and remove the 'single property' condition to allow small businesses to expand.
- Improvement Relief: extend beyond the current 12-month window, remove the 'occupation condition' to include landlords, and align with green and decarbonisation goals.
- Empty Property Relief (EPR): local authorities called for stricter conditions and lower generosity, while real estate respondents suggested longer periods of EPR, lower empty rates, or both.
The Government will explore the proposed changes above as a priority, along with:
- Receipts and expenditure methodology: review ahead of the 2029 revaluation.
- Antecedent Valuation Date (AVD): consider shortening to improve relevance.
- Administrative reform: use the merger of the Valuation Office Agency (VOA) and HMRC to simplify the process.
Further updates on the reform of the Business Rates system will be provided in the Autumn Budget 2025, taking place on 26 November.
- The rates for permanently lower tax rates on Retail, Hospitality and Leisure (RHL) properties with RVs below £500,000 from April 2026 will also be confirmed, and the rate for the high-value multiplier.
The Government will continue to work with stakeholders to design changes to the business rates system.
Useful guides on this topic
Autumn Budget 2024: At a glance
The Chancellor, Rachel Reeves, presented her 2024 Autumn Budget to Parliament on 30 October 2024. Her key announcements included raising the rates for the National Living Wage (NLW), Employer's NICs, Capital Gains Tax (CGT) and Stamp Duty Land Tax (SDLT) as well as making Inheritance Tax (IHT) reforms for business property.
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