Treasury considers wider small business rates relief

The Treasury is reportedly considering raising the threshold for full Small Business Rates Relief in England from £12,000 to £18,000, potentially exempting approximately 75,000 additional commercial properties from business rates.

The proposed measure is understood to be under consideration for Chancellor John Healey’s Budget on 28 October. It could cost approximately £460m annually, with implementation reportedly anticipated from April 2027.

The figures and timetable have not been confirmed through an official Budget announcement. Businesses should therefore treat the proposed change as a reported government plan rather than an entitlement already established in law.

Under the existing Small Business Rates Relief system, qualifying occupiers of a single property in England with a rateable value of £12,000 or less can receive 100% relief. Partial relief applies to eligible properties with rateable values between £12,001 and £15,000.

Rateable value is the valuation used to assess a commercial property’s business rates liability. It is not the company’s revenue, profit or the current market price of the building.

The reported higher threshold would primarily benefit qualifying occupiers of commercial premises whose existing rateable values leave them liable for some or all of their bill. Shops, cafés, pubs, salons and other smaller premises-based businesses could be among those affected.

Eligibility would still depend on the final rules, including how relief is calculated for businesses occupying multiple properties. A small company with several locations may not qualify on the same terms as a business operating from one premises.

Business rates represent a recurring expense that can be difficult to reduce quickly. Unlike costs that vary directly with sales, property liabilities may remain substantial during periods when customer demand weakens or operating margins are compressed.

Removing or reducing that liability can provide additional cash for maintenance, wages or other expenditure. The actual commercial effect depends on a business’s existing bill, profitability and other cost pressures.

The proposal comes amid continuing criticism of the wider business rates regime. Earlier in October, more than 200 employers supported calls for fundamental changes to commercial property taxation, arguing that premises-based companies face disproportionate costs compared with some forms of online business.

The reported government approach differs from a complete redesign of the system. Raising the relief threshold would provide targeted assistance to eligible smaller properties while retaining the underlying valuation-based framework.

Reports also suggest ministers are examining additional taxation of large online retailers to help finance the relief. That possibility introduces questions about how online transactions would be defined, which businesses would pay and how additional taxation might affect prices or investment.

Online and physical commerce are not entirely separate markets. Many retailers operate through both shops and websites, while online businesses also use warehouses, offices and distribution centres that may be subject to business rates.

Any new measure would therefore need careful design to avoid unintended differences in treatment between businesses with similar commercial activity but different distribution models.

Local government funding presents another consideration. Business rates form part of the wider financing arrangements for local authorities, so expanded relief would require an explanation of how the change would be administered and financed.

The government will also need to establish how the proposed threshold interacts with existing reliefs, revaluations and other adjustments scheduled for the next financial year.

The reported £18,000 threshold could provide meaningful support to qualifying smaller occupiers. Its precise value to businesses cannot be determined until the Budget confirms eligibility, implementation arrangements and the treatment of properties currently receiving partial relief.