Non-Domestic Rates (Business Rates) – 2025/26 Measures
Non-domestic rates, more commonly known as business rates, remain one of the most significant costs for commercial property occupiers and landlords in the UK. The 2025/26 financial year introduces a combination of continuity and targeted adjustments.
The Basic Property Rate has been frozen at 49.8p, but inflationary increases will affect higher poundages. At the same time, the government has confirmed a suite of targeted reliefs designed to support specific sectors and ease pressure in priority areas.
This article provides a detailed breakdown of the 2025/26 business rates measures, their implications, and what commercial landlords and occupiers need to know.
Overview of the 2025/26 Business Rates Framework
The central announcement for the new financial year is the freeze on the Basic Property Rate (BPR) at 49.8p. This freeze has been welcomed as a stabilising measure for smaller and medium-sized businesses, preventing an across-the-board rise in business rates liability.
However, while the BPR remains unchanged, higher poundages – applied to larger properties with higher rateable values – will see inflation-linked increases. This approach balances fiscal needs with a recognition of the ongoing cost pressures faced by smaller firms.
Breakdown of Poundages for 2025/26
- Basic Property Rate (49.8p): Frozen for the year, covering the majority of commercial properties.
- Higher Property Rate: Increased in line with inflation, applying to properties above a specified rateable value threshold.
- Additional Multipliers: Certain property types and regions may experience surcharges or adjusted multipliers, particularly where devolved administrations adopt tailored policies.
This tiered approach reflects the government’s commitment to protecting smaller businesses while still ensuring fiscal sustainability from larger occupiers.
Targeted Reliefs for 2025/26
In addition to the poundage adjustments, the budget confirms targeted relief schemes aimed at high-priority sectors. These include:
- Retail, Hospitality and Leisure Relief: Continuing support for sectors disproportionately affected by previous economic shocks, with percentage discounts applied up to specified cash caps.
- Small Business Relief (SBR): Maintained to shield the smallest occupiers, allowing many micro-businesses to pay no rates or significantly reduced bills.
- Enterprise Zone Reliefs: Available in designated zones to encourage business growth and regional investment.
- Green Investment Reliefs: Certain measures continue to exempt or reduce liability for renewable energy installations and energy-efficiency improvements.
Commercial landlords should take note: properties eligible for relief may become more attractive to tenants, potentially improving occupancy levels and rental demand.
Impact on Commercial Landlords
The 2025/26 measures carry several implications for landlords:
- Tenant Affordability: With many occupiers already facing high operating costs, the freeze on the Basic Property Rate provides breathing space. This may help sustain rental income stability, particularly in smaller units.
- Void Property Costs: Landlords remain liable for empty property rates after the relief period expires. In an environment where higher poundages rise with inflation, void costs for large properties could increase significantly.
- Lease Negotiations: Service charge provisions and liability for business rates are often key components in lease terms. Landlords may face renewed requests from tenants to share or mitigate costs.
- Valuation Sensitivities: The rateable value (RV) system underpins liabilities. As new revaluations are factored in, landlords should ensure appeals or challenges are lodged promptly where valuations are excessive.
Impact on Occupiers
For occupiers, the headline freeze will ease pressure, but larger businesses should prepare for increased liabilities due to inflationary multipliers. Key considerations include:
- Cash Flow Planning: Businesses must factor in adjusted bills from April 2025 onwards, particularly for higher-value premises.
- Eligibility Checks: Occupiers should review entitlement to reliefs annually, as changes in circumstances may alter eligibility.
- Strategic Location Choices: Reliefs in enterprise zones or local authority-designated areas could significantly reduce liabilities, influencing relocation or expansion decisions.
The Policy Rationale Behind the 2025/26 Measures
The government’s decision to freeze the Basic Property Rate reflects political and economic priorities:
- Support for SMEs: Smaller firms drive employment and community activity, making their protection a policy priority.
- Inflationary Discipline: Linking higher poundages to inflation ensures the system continues to generate revenue in line with fiscal pressures.
- Targeted Sectoral Support: Relief focuses on vulnerable but strategically essential sectors, such as retail and hospitality, while encouraging green investment.
This blended approach signals continuity but also careful calibration in response to broader economic conditions.
Challenges Ahead
Despite the stabilising effect of the 2025/26 measures, challenges remain:
- Ongoing Calls for Reform: Many stakeholders argue for a wholesale overhaul of the business rates system, citing structural unfairness and the shift towards online commerce.
- Inflation Risks: If inflation remains elevated, higher poundages could escalate quickly, increasing burdens on large occupiers and landlords with significant voids in their portfolios.
- Regional Divergence: Devolved administrations in Scotland, Wales, and Northern Ireland may adopt different multipliers or reliefs, which can complicate compliance for businesses operating across the UK.
What Landlords and Occupiers Should Do Now
- Review Liabilities: Check current and projected bills for 2025/26 and model scenarios under inflation-adjusted multipliers.
- Claim Reliefs Promptly: Reliefs often require proactive claims – missing deadlines can result in higher-than-necessary bills.
- Engage with Tenants: Landlords should communicate openly with occupiers about liabilities, particularly in multi-let properties.
- Monitor Policy Developments: Further consultations on long-term business rates reform are expected, and stakeholders should remain engaged.
FAQs
What is the Basic Property Rate for 2025/26?
The Basic Property Rate has been frozen at 49.8p.
Will all business rates increase in 2025/26?
No. Smaller properties on the BPR will not see changes, but higher-value properties will face inflationary increases through adjusted poundages.
What targeted reliefs are available?
Reliefs include retail, hospitality and leisure support, slight business relief, enterprise zone reliefs, and exemptions for certain green investments.
Do landlords pay business rates on empty properties?
Yes, after initial exemptions expire, landlords are liable for empty property rates, which can be significant for large premises.
Is further reform to business rates expected?
Yes. Although the 2025/26 measures offer stability, long-term reform is still under consideration, particularly to address concerns around fairness and competitiveness.
Conclusion
The 2025/26 business rates measures offer a mix of relief and challenge. The freeze at 49.8p provides certainty for most occupiers, but inflation-linked increases at higher poundages, combined with enduring void liabilities, mean commercial landlords must remain vigilant.
Targeted reliefs are a crucial opportunity for many businesses, but proactive management is essential to ensure maximum benefit. As the debate over broader reform continues, both landlords and occupiers should prepare for both immediate adjustments and long-term changes.
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