Business rates have been criticised for decades as outdated, unpredictable, and disproportionately damaging to smaller businesses relative to large online retailers who use less physical space. In August 2026, proposals to reform the system and replace it with a new municipal revenue-based model are actively moving through Parliament as part of the Burnham government's economic agenda.
This is not the first time business rates reform has been promised. Successive governments have tinkered at the margins — multiplier freezes, retail reliefs, transitional reliefs — while leaving the fundamental structure unchanged. What makes the current proposals different is that they target the architecture of the system itself, not just the reliefs layered on top.
This article explains what is being proposed, who stands to benefit most, the likely timeline, and critically, what businesses should be doing right now to ensure they are claiming every available relief under the current system while reform makes its way through Parliament.
What Is Wrong With the Current System
Business rates are calculated by multiplying the rateable value of a property — an estimate of its open market annual rental value as assessed by the Valuation Office Agency — by a multiplier set each year by the government. For 2026/27, the standard multiplier is 54.6 pence in the pound. A property with a rateable value of £30,000 therefore pays approximately £16,380 in business rates before any reliefs.
The fundamental problem is structural. Rateable values are based on property values, not on how much a business actually earns or whether it is profitable. A restaurant that has been struggling since the pandemic pays business rates based on the value of its premises regardless of whether it is making money. An online retailer with a warehouse on the edge of a city pays rates on that warehouse, but its value is a fraction of the revenue it generates compared to a high street shop with equivalent rates liability.
The revaluation cycle has historically been too infrequent — the last general revaluation took effect in April 2023, before which some businesses had been assessed on 2015 rental values that bore no relationship to their actual current market position. And the multiplier has increased faster than inflation in several recent years, amplifying the burden on sectors with fixed physical footprints.
What the Burnham Government Is Proposing
The proposals being discussed in Parliament move away from a pure property-value-based system towards a model that incorporates local business revenue — sometimes described as a municipal revenue levy. Under this approach, a business's rates liability would reflect a combination of property characteristics and actual trading activity, rather than solely the estimated rental value of the space.
The specific design of the new model is still being debated. Key questions under discussion include how revenue would be defined and verified for the purposes of calculating the levy, how the system would treat businesses that trade both online and from physical premises, what transitional arrangements would protect businesses that currently benefit from reliefs or lower-band assessments, and how local authorities would be funded during the transition given that business rates currently flow primarily to central government.
The government has signalled that the reform is designed to provide particular relief to independent brick-and-mortar retailers, community pubs and hospitality venues, and high street businesses that have faced the greatest competitive pressure from online commerce. Larger commercial landlords, distribution centres, and out-of-town retail parks may face a different outcome.
The Timeline: This Is Not Happening Overnight
Business rates reform is a multi-year project. The legislation is moving through Parliament, but the practical implementation of a new system requires Valuation Office Agency assessments under new criteria, local authority system changes, transitional relief design, and extensive consultation with business groups. A full transition to a new model is unlikely before 2029 at the earliest.
This matters because it means businesses will be operating under the current system for the next two to three years regardless of what Parliament eventually agrees. The right response is not to wait — it is to ensure you are maximising every available relief and entitlement under the current rules right now, while the reform is designed and legislated.
Reliefs Available Under the Current System
Several significant reliefs are available to businesses under the existing business rates framework, and a meaningful proportion of eligible businesses either do not claim them or do not claim them in full.
Small Business Rate Relief is available to businesses that occupy a single property with a rateable value below £15,000. Businesses with a rateable value of £12,000 or below pay no business rates at all. Those with a rateable value between £12,001 and £15,000 receive tapered relief on a sliding scale. This relief is worth thousands of pounds per year to qualifying businesses and is applied automatically in most cases — but eligibility should be confirmed and any changes in occupancy or rateable value reported promptly.
Retail, Hospitality and Leisure Relief applies to qualifying occupied properties for 2026/27 at 40%, capped at a total relief of £110,000 per business across all properties. This relief is available to shops, restaurants, cafés, bars, hotels, gyms, and cinemas among others. It is applied by local authorities and should appear on your rates bill — if it does not, contact your local authority to confirm eligibility.
Mandatory and Discretionary Charitable Rate Relief applies to registered charities, community amateur sports clubs, and some other not-for-profit organisations. Mandatory relief is 80% of the rates liability; discretionary top-up relief of up to a further 20% is at the local authority's discretion.
Empty Property Relief provides a full exemption from business rates for the first three months a commercial property is unoccupied. After three months, business rates become payable in full on empty properties, with exceptions for certain industrial properties that benefit from a six-month exemption period.
What You Should Do Right Now
Check that the relief on your current rates bill is correct. Errors in business rates assessments and incorrectly applied reliefs are more common than they should be. Your rateable value, the multiplier applied, and any relief deductions should all be verifiable.
If you believe your rateable value is incorrect, you can challenge it through the Check, Challenge, Appeal process. Rateable values were updated in the April 2023 revaluation and a further revaluation is expected in 2026. If your property's market rental value has fallen since your current assessment — for example, if you operate in an area where market rents have softened — a successful challenge can result in a lower rates liability going forward and potentially a refund of overpaid rates.
If you occupy multiple properties, review whether you are claiming the correct reliefs across all sites. Small Business Rate Relief is only available on a single property for most businesses; however, the rules on how this applies when you have more than one property are specific and worth verifying with your accountant or rates specialist.
Keep records of any periods of genuine vacancy, as Empty Property Relief requires notification to the local authority to apply correctly.
A Note on Pubs and Hospitality
Pubs and licensed hospitality venues have been among the most vocal advocates for business rates reform, and the proposals specifically reference these businesses as priority beneficiaries. Many pubs have rateable values that do not reflect the economic reality of trading in a sector where margins are thin and fixed costs — rates, energy, licensing, food and labour — represent a very high proportion of revenue.
In the meantime, the Retail, Hospitality and Leisure Relief at 40% for 2026/27 (capped at £110,000) is the most significant short-term relief available to qualifying venues. If you operate a pub, restaurant, hotel, or leisure facility and are not certain this relief is being applied to your rates bill, verify this with your local authority.
CoreAcc Accountants works with clients in the hospitality and retail sector across Hertfordshire and North London and can help you review your current rates position as part of a broader business cost review.
Want to review your current business rates position and ensure you are claiming every available relief? Contact CoreAcc Accountants today.
CoreAcc Accountants is an ACCA-accredited firm of Chartered Certified Accountants. This article was published on 22 August 2026 and reflects legislation and government proposals in force at that date. It does not constitute professional advice. Always seek specific advice for your individual circumstances.
