UK Budget 2026: smaller businesses to benefit most from rates reforms

Chancellor John Healy announced an increase during his Budget 2026 speech to the small business rate relief threshold which will result in a further 70,000 retail, hospitality and leisure businesses paying no business rates. The Budget also provides an additional 20% reduction in business rates for pubs, music venues and social clubs.

Eligibility for the enhanced support will depend on the value of the property’s premises rather than the size of the business itself. Under the revised scheme, retail, hospitality and leisure businesses occupying properties with a rateable value of up to £18,000 will qualify for full rates relief. Larger retailers and other occupiers with higher-value premises will generally remain liable for business rates, although they will benefit from a two-year freeze intended to prevent above-inflation increases in their rates bills.

Claire Francis, commercial law expert with Pinsent Masons, said: “Cutting rates for smaller businesses is a clear signal that Andy Burnham’s drive to support the viability of Britain’s high streets continues, easing some of the burden on small businesses. While these changes will undoubtedly be welcomed by smaller high-street operators, the question for larger retailers is whether the growing divide in the rates burden places unsustainable pressure on their physical business models.”

The government's announcement comes as retailers continue to face a challenging economic backdrop. Alongside measures on business rates, the Budget included changes to import taxes which the government said are intended to support businesses and consumers.

Francis said: “In many respects, retailers will find themselves in a similar position to this time last year. Consumer spending remains constrained, while the war in Iran has introduced further disruption into already embattled supply chains.”

“Once again, retailers, and supermarkets in particular, face difficult decisions over which additional costs they can absorb and which they will pass on to consumers. While the chancellor’s import tax cuts may offer some relief for consumers, the extent to which they alleviate the wider pressures facing retailers remains to be seen.”