Budget 2026- Overall win for Retail, Hospitality and Leisure Sector but Colliers Business Rates Team warns business rates set to increase by 28% in next six years

The OBR forecast (published today) alongside the Budget reveals that the Government plans to increase the tax take from business rates overall from £33.6 billion in 2025/6 to £43.1 billion in 2031/32- an increase of £9.5 billion in 6 years(28%).

According to published figures, (see appendix below) the Government expects to increase the tax take every year. As John Webber, Head of Business Rates at Colliers said, “Whatever give aways the Chancellor gave today, there are plans for rates bills to rise substantially in the years ahead…. a far cry from reducing business rates overall as promised in the Labour manifesto.”

RHL Reliefs

Elsewhere in the Budget the Chancellor announced measures to help the RHL sector including:

Raising the threshold for Small Business Rates Relief from a rateable value (RV) of £12,000 to an RV of £18,000 for qualifying Retail, Hospitality & Leisure businesses, with a sliding scale up to a RV of £21,000. The Chancellor said this would bring 70,000 extra businesses out of paying business rates altogether- about half of all shops, restaurants, pubs, gyms, cafes,salons.

And for other RHL businesses that still pay business rates, rates will be frozen in real terms for the next two years.

The Chancellor also confirmed a further 20% cut in business rates from April 2027 for pubs, social clubs, live music venues in England- on top of a real-terms freeze for 2027/8 and 2028/9. This builds on the 15% relief this year 2026/7 bringing the total relief to 35% from April 2027.

To pay for this the Government will raise taxes on gambling – increasing tax for higher stake machines by 25%. There will be no business rates relief to Vape shops and Adult Gaming centres from April 2027.

John Webber, Head of Business Rates at Colliers commented: “The extension of transitional relief /freezing business rates in real terms for another two years for the RHL sector is to be welcomed by the sector. One of the big winners will be the hotel industry, many of whom would otherwise have seen big rates bills rises due to their large increases in rateable value following the 2026 Revaluation.

The pubs/ music venues are the biggest winners overall however, gaining the 20% discount and the RHL freeze.  Some smaller pubs and shops will also benefit from being pulled into 100% SBRR (small business rates relief) category.

Whether the Chancellor has done enough to prevent further pressures in the sector however, remains to be seen. Remember these measures are only for two years. Many businesses thinking about opening a pub or hotel, would want reassurance that they  would not be hit by big rates bills in two years’ time. So, in that sense the announced measures do little to encourage further investment.

Extension of Transitional Relief Supplement (TRS) 1p

The 1p transitional Relief Supplement for those not in receipt of Transitional relief and SSB will now apply for a further two years- it was due to be removed from 1 April 2027.

Fiscal Devolution of Business Rates

The Chancellor also announced a fiscal devolution roadmap stating that by April 2027: English mayors will begin retaining 20% of business rates revenues, replacing traditional grant funding. By the end of the decade (2030), local authorities and combined authorities are planned to retain 100% of business rates locally.

The reforms run alongside upcoming plans for mayors to receive a share of income tax receipts from April 2028 and powers to introduce an Overnight Visitor Levy starting in 2028. 

These measures are part of Labour’s wider push to empower English mayors and local leaders, with “taxes raised locally should be spent locally”.

Webber is cynical this could work in practice, “This would be a retrograde step. There are certain areas of the country where the amount of business rates collected subsidize other parts of the country. If the borough of Westminster, for example was allowed to keep all the business rates it raised rather than sending elsewhere, it could probably pave its streets in gold! I would be surprised if this measure comes to fruition.”

Introduction of further business rates anti avoidance rules

In papers accompanying the Budget, the Government has committed to going further to deter business rates mitigation schemes, claiming this is part of their anti-avoidance policy.

Webber comments, “ Rather than dealing with what has caused such schemes in the first place-  the high liability levels for empty properties- the Government continues to miss the bigger picture.

Current empty property relief period is too short, particularly in the RHL and offices sectors where owners only receive three months relief. Yet property owners can easily take up to 12 months to find an appropriate new tenant for their properties. 

We believe the Chancellor should therefore instead have extended the three- and six-month empty rates holidays to twelve months with 50% relief thereafter and to do this for all property types including the offices and retail sectors too.

Such a move would encourage investment and refurbishment, prevent unnecessary demolition, support high street and town centre regeneration and reduce the need for mitigation schemes and complex anti avoidance rules.

If the government instead cracks down on mitigation schemes further, in the guise of “anti-avoidance” we could see owners attempting to get their properties removed from the rating list through demolition or desecration, this reducing quality stock from our towns and cities, just as we saw in the 1970s and 1980’s, when similar “anti-avoidance” measures were put in place.

Webber concludes,” The Chancellor’s measures today had winners and losers. Whilst the RHL sector was a winner, with more properties in the sector able to claim reliefs and receive real-term freezes, the knock-on effect means a reduced tax base overall and therefore bigger companies in the rating system will need to pay more in business rates to compensate.

"Our preference would be to widen the tax base not to reduce it. Already over 700,000 businesses pay no business rates at all. We believe everyone should pay something but at a lower multiplier for all.

"The losers of this budget will be those who budgeted for the removal of the 1p Transitional Relief Supplement and those who mitigate their empty business rates costs who may now face anti-avoidance legislation in England.

"Added to this, the fact that the overall trajectory for business rates is up, not down, is a worrying prospect for UK businesses and a mistaken belief the golden calf can be milked for ever.”