After years of complaints from high street retailers, the government’s finally tweaked business rates, but not everyone’s celebrating. Chancellor Rachel Reeves announced a “permanently lower” rate for small retail, hospitality, and leisure businesses in Budget 2025, funded by slapping higher charges on big properties. The kicker? Those “lower” rates are still way higher than the pandemic-era relief businesses got used to. And while corner shops might catch a break, large retailers are staring down a bill that’s got them seriously worried. Here’s what’s changed, who wins, who loses, and why the industry’s response has been… lukewarm at best.
What Are Business Rates, Anyway?
Think of business rates as council tax for commercial properties—whether you’re running a café, hotel, office, or pub, you’re paying up.
The calculation’s pretty straightforward: take your property’s rateable value (basically what it’d rent for annually on the open market) and multiply it by a government-set figure. For 2025/26, that multiplier sits at 49.9p for small businesses and 55.5p for standard ones.
Properties get revalued every three years based on inflation, with the next shake-up hitting this spring. During the pandemic, retail, hospitality, and leisure businesses scored 40% relief to help them survive—a lifeline that’s now being dramatically scaled back.
The Big Changes in Budget 2025
Reeves’ plan sounds simple on paper: lower rates for small businesses, higher rates for big ones. But devil’s in the details.
Who Gets Relief?
Retail, hospitality, and leisure firms with smaller footprints get the best deal. Properties valued up to £51,000 receive 20% relief, while those between £51,000 and £500,000 get 10% off.
Compare that to the current 40% discount, though, and you’ll see why business owners aren’t popping champagne. “To shrink this relief to between 10% and 20% has taken everyone by surprise,” said David Parker from Savills.
Who Pays More?
Properties with a rateable value above £500,000 face a surcharge—currently set at around 5.8% (though legislation allows for up to 20%). That’s your big retail warehouses, major hotel chains, and large office buildings.
The Treasury’s betting this’ll bring in an extra £2.7bn by 2029-30. Not exactly pocket change.
Why Industry Leaders Aren’t Thrilled
If you’re expecting universal praise, think again. The response has ranged from “meh” to outright criticism.
“Too Little, Too Late”
HOLBA chief executive Ros Morgan pulled no punches: “It doesn’t fix the structural issue of business rates and instead offers a series of short-term sticking-plaster solutions.”
UKHospitality’s Kate Nicholls echoed the frustration, pointing out the discount delivered is only a quarter of the maximum relief the government proposed last year. Add rising minimum wage costs into the mix, and many hospitality businesses are still watching their bills climb.
The “Big Box” Problem
Here’s the twist: that higher levy isn’t just hitting Amazon warehouses and massive distribution centres. It’s catching any property valued above £500,000—including plenty of high street department stores and hotel chains.
Parker called the concept “fundamentally flawed,” arguing the narrative targets “online retail giants” while the reality hits a much broader range of businesses.
What This Really Means for Businesses
Small independent retailers and hospitality venues get breathing room—though less than they’d hoped. Large retailers face higher costs at a time when they’re already juggling rising wages and stubborn inflation.
The bigger question remains unanswered: does this actually level the playing field between physical stores and online giants? Critics argue it doesn’t, since e-commerce companies still only pay rates on warehouses, not on every customer interaction like physical retailers do.
For now, businesses are recalculating their budgets and hoping this isn’t just another temporary fix before the next shake-up.
Key Takeaways
Budget 2025’s business rates changes offer modest relief for small properties but significantly higher costs for large ones. The pandemic-era 40% discount is dropping to 10-20% for retail, hospitality, and leisure businesses, whilst properties valued above £500,000 face new surcharges. Industry response has been tepid, with leaders arguing the reforms don’t address fundamental structural problems. The Treasury expects to collect an additional £2.7bn by 2029-30—money that’ll come straight from commercial property occupiers’ pockets.
Frequently Asked Questions
Q1: How much will small businesses actually save on business rates?
A: Small retail, hospitality, and leisure properties (under £51,000 rateable value) get 20% relief, whilst those between £51,000-£500,000 get 10% off. That’s a significant drop from the current 40% discount, so whilst it’s technically “relief,” many businesses will see their bills increase compared to 2025/26.
Q2: Why are large retailers upset about the changes?
A: The new surcharge hits any property with a rateable value above £500,000—not just massive warehouses. That includes high street department stores, hotel chains, and large pubs. They’re facing higher costs at a time when wages and operating expenses are already climbing, making the timing particularly painful.
Q3: Do business rates still favour online retailers over high street shops?
A: That’s the core complaint that hasn’t been resolved. Physical retailers pay rates on every shop location where they interact with customers, whilst online retailers only pay on warehouses and distribution centres. The new system tweaks the numbers but doesn’t fundamentally change this dynamic.
Q4: When do the new business rates come into effect?
A: The changes roll out for the 2026/27 financial year, following the scheduled revaluation in spring 2025. Businesses should start seeing the impact on their bills from April 2026 onwards.
Q5: Could the surcharge on large properties increase further?
A: Technically, yes. The legislation allows for up to 20% to be added to bills for properties above £500,000, though it’s currently set at around 5.8%. The government could dial that up in future budgets if they need additional revenue.
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Effective Date: 15th July 2025
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