Business rates reform: Who are the winners and losers in retail’s £600m shake-up?

UK retailers face a major shake-up to business rates in April 2026 — a reform aimed at “levelling the playing field” in one of the industry’s most contentious areas by offering relief to smaller stores while raising costs for larger players.

The policy will see reduce a reduction to the business rates multiplier for smaller retail, hospitality and leisure sites from next year, which will be funded by an increase in the multiplier on larger properties.

Business rates have long been a pain point for the retail sector, with many arguing they are antiquated and stifle growth on the high street. Despite this ill-feeling towards business rates in their current form, this new policy has not been met with much enthusiasm – and has been branded by Colliers head of business rates John Webber as “absolutely nuts.”

Research by Colliers suggests the top 1% of retail properties — supermarkets and flagship stores — could see bills surge by more than £600m under these reforms – but Chancellor Rachel Reeves says they will help independents retailers and smaller businesses in less affluent areas.

So will this business rates deliver on the government’s promises to rebalance the system, and what will its true impact be in terms of who benefits — and who pays?

What’s changing?

The reform introduces a lower business rates multiplier for properties with a rateable value (RV) under £500,000, while increasing the multiplier for those above this threshold.

A Treasury spokesman told The Times: “We are a pro-business government that is creating a fairer business rates system to protect the high street, support investment and level the playing field.

“Our reform will introduce new, permanently lower business rates in 2026 while removing the £110,000 cap, benefiting over 280,000 retail, hospitality and leisure properties. This will be sustainably funded by a new, higher rate on the 1% of most valuable business properties.”

Currently, retail’s business rates bill sits around £11bn a year. More than 335 West End retail properties fall into the higher rateable bracket, making them especially vulnerable to rising costs.

Retail property expert Jonathan De Mello explains the focus on penalising larger retailers: “The reform will penalise retailers with bigger spaces and higher rateable values.

“Does it go far enough for the smaller ones? Probably not. It depends on the multiplier that’s going to be adopted. If it’s a low multiplier, then it potentially could be impactful for them.”

De Mello also warns about inflationary pressures: “Business rates tend to go up either way every year with inflation, so even if rates go down because of this revaluation, next year you’ll still see increases year on year.”

The winners — retailers getting relief

Smaller retailers, including independents, may benefit, but the impact is limited.

De Mello says: “Smaller retailers will mostly continue as they have been. For independents, it will help, but it’s not going to make or break their business model.”

He adds: “To stimulate more independent retail, there needs to be wide engagement from multiple stakeholders across town centres — this reform on its own won’t achieve that.”

The Treasury says over 280,000 retail, hospitality and leisure properties will benefit from the lower multiplier, after removing the £110,000 relief cap.

However, Colliers warns this “victory” may be short-lived. Many smaller retailers face withdrawal of business rate reliefs from April 2026 and could see rateable values rise in the next revaluation — cancelling out gains.

Even those under the £500,000 threshold could see bills rise if rents have climbed sharply since Covid. Colliers estimates retail RVs could rise by 20–25%.

Jeff Moody, chief commercial officer of the British Independent Retailers Association (BIRA), welcomed the government’s focus on small business relief but raised concerns:

“While we welcome the Government’s commitment to supporting smaller retail businesses through the 2026 business rates reform, the reality for many independent retailers remains challenging.”

Moody points to the cut in the Retail, Hospitality and Leisure (RHL) discount from 75% to 40% as a major blow, warning future rises in the lower multiplier could “exacerbate the impact already felt.”

He also warns that small department stores and independents in higher-value locations — particularly in the South East — risk crossing the £500,000 threshold: “These businesses are often the anchor stores that help sustain local high streets and communities.”

The losers — who’s facing higher bills?

Big grocers and large-format retailers are expected to face the steepest increases. Colliers reveals the top 1% of retail properties — including supermarkets and flagship stores — could see bills rise by over £180,000 a year in London’s West End alone.

With 335 properties over £500,000 RV, liabilities could jump from £212m to £274m — an increase of nearly £63m, and one which Webber says works against the retail sector at large.

He explains: “At a time when the high street is already suffering from cuts to reliefs for small stores and rising employment costs, why does the government think it is sensible to hit the bigger retail, hospitality and leisure players — the ones that provide anchor tenants for the high street, attract footfall and create jobs — with even more punitive business rates taxes?”

Colliers warns this may cause larger retail firms to pause expansion or hiring – a concern which DIY retailer B&Q echoes.

A spokesperson for the retailer, which operates large-format stores nationwide, says: “Retail is a fantastic engine for growth and quality jobs, but the higher rate of business rates for larger stores […] risks impacting investment and employment in communities right across the country.

“We believe there should be fundamental business rates reform to level the playing field with large online tech companies. All stores should be taken out of paying the proposed higher multiplier — which simply penalises retailers with larger shops employing more people.”

Retail investor and Ryman’s chairman Theo Paphitis has warned business rates “will kill the high street on its own at some stage.” Speaking at the 2025 Retail Technology Show, he criticised ministers as “absolutely proper muppets on the greasy pole” who “did absolutely nothing.”

De Mello highlights struggling retailers are among those hardest hit: “Retailers such as Poundland, which are currently restructuring, may find themselves penalised if their properties have rateable values over £500,000. For businesses already under pressure, increased rates could push margins further and threaten store viability.”

He also notes an uneven playing field between physical retailers and online giants: “Online retailers domiciled in the Netherlands, Ireland or Luxembourg avoid significant corporation tax, so taxing warehousing and logistics assets at a higher level could help fund lower rates for the retail and leisure sectors.”

Will this really help the sector?

Colliers warns the government’s approach may “misfire” and fail to deliver the intended impact.

Webber argues: “What we had hoped to see from Labour’s business rates policy was a lower multiplier across the board… Instead, we will have a system that is even more complicated and looks likely to damage rather than save the high street, stifling investment and growth.”

De Mello sees no clear winner or loser: “Smaller retailers, especially independents, will likely continue as they have been. The reform will help them to some extent, but it’s not going to make or break their business models or suddenly stimulate more independent retail. That would require much broader engagement across town centres.”

He warns larger retailers will reduce investment, rethink large stores, and face increased vacancy: “The current system isn’t fair, as it penalises large retailers to benefit smaller ones.”

De Mello suggests introducing flexibility around the £500,000 threshold and taxing based on asset class: “Retail and leisure sectors, facing tough markets, should have lower rates, while industrial and logistics sectors could be taxed higher to fund this.”

Reform or risk?

The business rates reform aims to ease pressure on smaller retailers but risks hitting larger stores — supermarkets, grocers, and flagship outlets — with sharply higher costs.

While the government promises a fairer system funded by the top 1% of properties, critics warn it may backfire — damaging the very high streets it seeks to protect.

As UK retail faces rising costs and changing consumer habits the current reforms seem to have picked the wrong target by focusing on larger format stores rather than wider reform which prioritises the taxation of online-only retail operators. As it stands, this rates reform may fail to deliver meaningful relief and instead accelerate closures, job losses and investment pullback.