UK Budget 2025: Business rate rises could increase pressure on high street

Rachel Reeves announced a lowering of tax rates on retail, hospitality and leisure (RHL) properties, with a 5p drop in multipliers in England for small and standard sized properties.

Offsetting this, however, will be a higher rate on properties valued at £500,000 or higher, which is being raised by 2.8p above the national standard multiplier.

The changes are due to take effect from 1 April 2026, as part of a wider re-evaluation based on property prices.

But Clare Francis, a commercial business expert with Pinsent Masons, said the new model could put increased strain on the high street and on other businesses which rely on a physical presence.

“Today's Budget signals a widening of the competition cost gap between traditional bricks and mortar retailers and those with a greater online presence,” she said.

“While CPI-linked uprating of business rate multipliers continues, the introduction of a new banded multiplier system from April will impose higher rates on properties with rateable values over £500,000. This, alongside reduced relief for retail, hospitality and leisure businesses, means that traditional retailers could find themselves under greater cost pressures. 

“While the chancellor heralds this measure as a move to target online retailers with large warehouse premises, in reality it is supermarkets, wholesalers and discount retailers which will likely bear the brunt of rising costs, as the vast majority of their property portfolios exceed the £500,000 rateable value threshold.”

Under the changes put forward in the Budget, the small business RHL multiplier will now be 38.2p with the standard multiplier 43p in 2026-27. For larger value properties it will increase to 50.8p.

Reeves also announced a transitional relief scheme aimed at providing support to the largest business rates payers – such as airports and hospitality – worth £3.2 billion in an effort to help stimulate post-Covid recovery among those who will see charges rise.

But, warned Francis, trying to mitigate the impact of the new rates would leave businesses facing a difficult choice.

“With retailer appetite to absorb further costs likely to be low, business leaders have two key options: look to pass on costs to consumers or apply pressure on their supply chains to reduce costs,” she said.

“The latter approach presents its own set of risks. Supply chains remain vulnerable following the disruptions prompted by Brexit and Covid, making unilateral cost-cutting a high-risk strategy. 

“If cost reductions are made a condition of continuing to do business, this pressure could undermine quality, breach regulatory obligations, and damage brand and reputation.

“Retailers should consider alternative levers such as operational efficiency, automation, and collaborative supplier models - including supply chain finance - to balance cost control with resilience and compliance.”

“It's likely that retailers with an omni-channel presence are better hedged to weather the impacts in the short to medium term, but long-term resilience will require continuing investment in technology, digital capability and strategic footprint optimisation.”

The move comes as part of a broader series of changes to business rates, following on from an interim report published by the government earlier in 2025.

London’s enhanced business rate retention scheme, and pilots in Cornwall, Liverpool and the west of England allowing the areas to retain 100% of business rates, will be extended until 2028-29, with Leeds City Council – as part of the new City Fund for the West Yorkshire conurbation – being allowed to retain 100% of business rates growth above an agreed baseline for 25 years

Small business rates relief businesses expanding into a second property is to be continued, while a consultation on how to remove barriers to investment will be launched.

Changes to the licencing regime for hospitality businesses are also set to be reviewed, with the government now asking licensing authorities in England and Wales to include the need to promote growth and deliver economic benefits in decisions, with a further planning reform and a national licencing policy framework to be published in the future.