Business Rates Overhaul & High Street Support
Permanent tax cuts for 750,000+ retail, hospitality and leisure properties, higher charges on large warehouses, and the end of duty-free parcels from overseas giants — here is what it all means for your business.
A Turning Point for the British High Street
The Autumn Budget 2025, delivered by Chancellor Rachel Reeves on 26 November 2025, marked a significant structural shift in how the UK taxes bricks-and-mortar businesses. For years, independent shop owners, pub landlords, hoteliers and leisure operators had argued that business rates penalised physical premises while online retailers — many of them based overseas — enjoyed a significant competitive advantage.
That argument has now been formally acknowledged in Government policy. The Budget introduces two interlocking reforms: a permanent reduction in business rates for retail, hospitality and leisure (RHL) properties below a certain value, funded directly by higher rates on the large-footprint warehouses that power e-commerce logistics — and separately, the phased abolition of the customs exemption that has allowed overseas online sellers to ship goods to UK consumers without paying customs duty.
Together, these changes represent the most meaningful rebalancing of the tax burden between high streets and online giants in a generation. The details, however, matter enormously for business owners planning ahead.
Permanent Lower Business Rates for Retail, Hospitality & Leisure
The headline reform ends the cycle of annual, temporary relief that had characterised business rates support for the RHL sector since the pandemic. From 1 April 2026, two new permanently lower multipliers replace the temporary 40% relief that applied throughout 2025–26.
How the new multipliers work
Business rates are calculated by multiplying a property's rateable value (RV) by a pence-in-the-pound multiplier. Under the new regime, two RHL-specific multipliers will be set 5p below their national equivalents:
| Property Type | Rateable Value | New Multiplier (from Apr 2026) | Change vs Standard |
|---|---|---|---|
| Small RHL | Under £51,000 | ~44.9p (small business rate) | −5p (permanent) |
| Standard RHL | £51,000 – £499,999 | ~49.9p (standard rate) | −5p (permanent) |
| Higher-value properties | £500,000+ | Higher multiplier applies | Increase applies |
✓ What's different this time
Unlike the temporary RHL relief (which expired each April, creating a "cliff-edge" of uncertainty), these new multipliers are permanent, legislated in statute, and carry no cash cap. Previously, the temporary relief was capped at £110,000 per business, meaning some larger chains received no benefit whatsoever. From April 2026, every qualifying RHL property with an RV below £500,000 will automatically receive the lower rate — whether an independent café or a high-street department store.
Who qualifies?
To qualify for the reduced RHL multipliers, a property must be wholly or mainly used for retail, hospitality, or leisure activity delivered to visiting members of the public in person. This means:
- Shops, boutiques, hairdressers, pharmacies, and other retail premises
- Restaurants, cafés, pubs, bars, takeaways, and food-service venues
- Hotels, B&Bs, guest houses, and short-term holiday accommodation
- Gyms, cinemas, theatres, bowling alleys, and similar leisure facilities
- Music venues and community cultural spaces
Crucially, online-only operations, dark kitchens, and warehouse-based businesses do not qualify — the relief is explicitly tied to in-person trade. Dark stores, fulfilment hubs and distribution centres are categorically excluded.
⚠ Rateable value revaluation from April 2026
April 2026 also brings the next routine revaluation by the Valuation Office Agency (VOA), based on property values as at April 2024. Some businesses that have seen property values recover post-COVID may find their RV has increased. This does not necessarily mean a higher bill — the multipliers adjust to reflect the overall change in the tax base — but businesses should check their draft RV and challenge it via the VOA if they believe it is incorrect.
"This is a permanent tax cut worth nearly £900 million per year, benefitting over 750,000 RHL properties. Unlike the current temporary relief, the new rates give businesses the certainty and stability to plan for the future."
— HM Treasury, Budget 2025 Retail, Hospitality & Leisure FactsheetHigher Rates on Large Warehouses — Funding the Cut
The permanent reduction in RHL rates does not simply add to the public finance bill. It is specifically funded by a higher multiplier on properties with rateable values of £500,000 or above — a category that represents less than 1% of all rateable properties but captures the vast majority of large distribution warehouses, including those operated by major e-commerce businesses.
| Property Category | Rateable Value | Direction of Travel (2026-27) | Annual Impact |
|---|---|---|---|
| Small RHL (shops, cafés, pubs) | <£51,000 | Lower rate | Significant saving per property |
| Standard RHL (mid-market retail) | £51k – £499,999 | Lower rate | Saving per property |
| Large warehouses & high-value sites | £500,000+ | Higher rate | ~£100m more in 2026-27 |
The Government estimates that large distribution warehouses — those used predominantly by online retail giants — will collectively pay around £100 million more in business rates in 2026–27 as a direct result of the higher multiplier. This additional revenue is channelled directly into the RHL rate reduction for high-street businesses.
📦 Who is affected by the warehouse surcharge?
- National and international e-commerce distribution centres (RV £500,000+)
- Large logistics hubs and multi-storey fulfilment facilities
- Major out-of-town retail warehouses with high rateable values
- Film studios are specifically exempt — a 40% relief continues until 2034
The surcharge does not affect the vast majority of small businesses that rent modest storage space or use shared warehouse facilities.
The £4.3bn Business Rates Support Package
The transition to permanently lower RHL multipliers coincides with a routine property revaluation in April 2026. Some businesses — even those that benefit from the new RHL multiplier — may face short-term bill increases because their RV has risen since the pandemic-era low. To cushion this transition, the Government has assembled a £4.3 billion support package.
What the package includes
- Transitional Relief — caps the percentage increase in rates bills for properties seeing large RV rises at revaluation
- Supporting Small Business (SSB) relief — extended to cover RHL properties that lose the old temporary relief; bill increases capped at the higher of £800 or the transitional relief cap (e.g. 15% for many properties)
- Expanded SSB coverage — over 200,000 RHL properties, including independent pubs and family-owned retailers, will have increases capped as they move to the new permanent system
- EV charge point relief — 100% business rates relief on electric vehicle charging equipment for ten years
- Film studio relief maintained — 40% relief for film studios until 2034
An illustrative example
✓ Worked example: Independent shop with RV £50,000
2025–26 bill (with 40% temporary RHL relief): approximately £8,982
Without any transitional support in 2026–27: the new revaluation and expiry of the cash-capped relief could have pushed this towards £14,898.
With the full package of support (new RHL multiplier + SSB transitional cap at 15%): the bill is capped at approximately £10,329 — a saving of around £4,569 compared to the uncapped position.
Over time, as the permanent multiplier embeds, the ongoing annual saving for this property is expected to be material and predictable — without the year-to-year uncertainty of a temporary relief.
Customs Duty on All Online Parcels — Ending the Duty-Free Loophole
The second major reform targets a structural inequality that has benefited overseas online retailers, particularly those based in China, for years. Under current rules, goods imported into the UK with a declared value of £135 or less are exempt from customs duty (though VAT still applies). This exemption — known as the de minimis relief or Low Value Import (LVI) relief — allows overseas platforms to ship individual parcels directly to UK consumers without incurring the same tariff costs that domestic importers face.
The scale of the problem
The volume of low-value imports into the UK has surged dramatically. According to HMRC data, around 1.6 million low-value parcels per day entered the UK in 2024, with total declared trade value rising from £3.8 billion in 2023–24 to £5.9 billion in 2024–25. This rapid growth has made the relief increasingly costly in terms of forgone revenue and increasingly unfair in competitive terms for domestic retailers.
| Importer Type | Current Position (to Dec 2026) | Position from March 2029 |
|---|---|---|
| UK retailer importing goods in bulk | Full customs duty payable | No change — full duty payable |
| Overseas seller — parcel value <£135 | Customs duty exempt (LVI relief) | Duty payable on all parcels |
| Overseas seller — parcel value >£135 | Full customs duty payable | No change — full duty payable |
| All commercial imports — VAT | VAT due (collected at POS since 2021) | VAT continues to apply |
The timeline for change
Now – 31 December 2026: No immediate change
The current £135 customs duty exemption remains fully in place. Tariff suspensions on certain goods (such as aluminium frames and food production ingredients) are extended through to 31 December 2026.
2027 – 2028: Design and consultation
The Government is running a public consultation on how the new Low Value Import (LVI) customs system will be designed — including simplified tariff "bucket" categories, data collection obligations on overseas sellers and online marketplaces, and potential per-parcel administration fees. Responses closed in March 2026.
By March 2029: Full removal of the duty exemption
All commercial imports into the UK, regardless of value, will be subject to customs duty. New IT systems (replacing the existing BIRDS bulk import system) are expected to be in place by this date. The OBR forecasts the reform will raise over £530 million per year by 2029–30.
⚠ Who is most affected?
The reform is specifically designed to target ultra-cheap parcel imports from overseas platforms such as Temu and Shein, where business models rely heavily on shipping millions of individual low-value items directly to UK consumers. Domestic UK retailers who import via normal bulk shipping channels are largely unaffected by this particular change, as they already pay customs duty under existing rules.
UK consumers purchasing items from overseas online platforms may see prices rise as sellers absorb or pass on the new duty obligations.
Small Shops vs Online Giants — Who Wins and Who Loses?
Read together, the two reforms represent a deliberate policy choice to tilt the tax system back towards physical, in-person trade. The table below summarises the impact across different business types.
| Business Type | Business Rates Impact | Customs Duty Impact | Overall |
|---|---|---|---|
| Independent high-street shop (RV <£500k) | Lower rates (permanent) | Minimal — imports in bulk already | Positive |
| Independent pub or restaurant | Lower rates + SSB cap | Not directly affected | Positive |
| High-street hotel or B&B | Lower rates (permanent) | Not directly affected | Positive |
| Large distribution warehouse operator | Higher rates (surcharge) | Not directly affected | Negative |
| Overseas online retailer (low-value parcels) | No rates impact (no UK property) | Duty on all parcels by 2029 | Negative |
| UK-based e-commerce SME (no warehouse RV >£500k) | Neutral | Broadly neutral — already pays duty | Broadly neutral |
A word of caution for high-street businesses
Whilst the direction of travel is clearly positive for most physical businesses, not every high-street operator will immediately see lower bills. The 2026 revaluation may increase some RVs significantly, particularly in areas where commercial property values have recovered strongly. The Transitional Relief and SSB cap are designed to cushion this, but businesses should actively monitor their draft rateable values once the VOA publishes updated figures.
Additionally, the overall cost environment remains challenging. Rising employer National Insurance contributions (effective April 2025), the increase in the National Living Wage to £12.71 from April 2026, and frozen income tax thresholds all continue to bear on both business costs and consumer spending power. The business rates reform helps, but it is one piece of a larger picture.
"To support a level playing field in retail, I will stop online firms from undercutting our high street businesses by ensuring customs duty applies on parcels of any value."
— Rachel Reeves, Chancellor of the Exchequer, Autumn Budget 2025What Should Your Business Do Now?
The changes take full effect from April 2026, but planning should begin well in advance. Here are the key steps we recommend:
Check your draft rateable value
The VOA will publish updated draft RVs ahead of April 2026. Review your draft RV as soon as it is available and check whether it reflects your property's actual open market rental value. An incorrect RV is the single biggest driver of avoidable business rates overpayment.
Confirm your RHL eligibility
Not all properties that benefited from the old temporary relief will automatically qualify for the new multipliers. The definition of a "qualifying RHL hereditament" is set out in legislation. If your property's use has changed, or you operate a mixed-use space, clarify your position with your accountant or the local billing authority.
Model your 2026–27 rates bill
Using your draft RV and the new multiplier rates (to be confirmed at Budget 2025), prepare a projection of your 2026–27 rates liability. This will inform cash-flow planning, lease negotiations, and any applications for Transitional Relief or SSB support.
If you import goods from overseas — review your supply chain
If your business sources products from overseas platforms for resale, consider what the phased removal of the £135 de minimis exemption means for your landed costs from 2027 onwards. Businesses relying on dropshipping from overseas suppliers will need to factor new duty obligations into their pricing and margin models.
Apply for transitional reliefs promptly
Qualifying for Transitional Relief and Supporting Small Business relief is not automatic in all cases. Speak to your accountant and contact your local billing authority early to ensure you receive the support to which you are entitled from the first billing cycle of 2026–27.
The MA & Co Accountants View
The Budget 2025 business rates reforms are a genuinely significant step for the UK's retail, hospitality and leisure sector. For the first time, the industry has certainty: permanent, legislation-backed rate reductions that do not require an annual negotiation with the Treasury. The abolition of the de minimis customs exemption — whilst phased in slowly — sends a clear long-term signal that the playing field between domestic high streets and overseas online giants will, eventually, be levelled.
That said, the transition period carries risk. Businesses caught between a higher revaluation RV and the gradual withdrawal of old reliefs will need to manage cash flow carefully. The interaction between higher employer NICs, the new Living Wage, and business rates changes requires careful, joined-up planning — not a piecemeal review of one change in isolation.
At MA & Co Accountants, we work with business owners across the retail, hospitality and leisure sectors to ensure they extract maximum benefit from reliefs they are entitled to, plan ahead for structural changes like revaluations, and manage their overall tax position efficiently. If any of these changes affect your business, we would encourage you to act sooner rather than later.
This article is intended for general informational purposes only and does not constitute specific tax or legal advice. Figures and policy details are based on HM Treasury announcements from 26 November 2025 and OBR projections. Businesses should seek professional advice tailored to their individual circumstances. MA & Co Accountants is a UK-based accountancy firm. All figures are in GBP unless stated otherwise.
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