Draft Non-Domestic Rating (Chargeable Amounts) (England) Regulations 2026
(1 day, 10 hours ago)
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The Committee divided: - Ayes: 11 / Noes: 4 - Question accordingly agreed to.
The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Samantha Dixon)
I beg to move,
That the Committee has considered the draft Non-Domestic Rating (Chargeable Amounts) (England) Regulations 2026.
It is a pleasure to serve under your chairship for the first time, Mr Turner.
On 1 April 2026, business rates bills will change as a result of the 2026 revaluation of all rateable values. The draft regulations will deliver a transitional relief scheme to gradually phase in bill increases resulting from the revaluation over three years. They will also deliver a 1p transitional relief supplement, in 2026-27 only, to help fund the cost of the support scheme.
I want to be clear to the Committee that the transitional relief scheme we are discussing is only one part of the support package announced by the Chancellor at the Budget in November. The transitional relief scheme by design only protects ratepayers from changes in their rates bills before other reliefs. As we know, changes in other rate reliefs can occur at the revaluation, which also affects rates bills. An obvious example is the ending of the covid-era 40% relief for retail, hospitality and leisure, which helped many businesses recover from covid over recent years.
That is why we also have in place the supporting small business relief scheme, which provides further support beyond transitional relief for those ratepayers who, at the revaluation, will lose certain other reliefs, including the 40% retail, hospitality and leisure relief. The supporting small business relief scheme is delivered by guidance rather than regulations, and the full details of the scheme were published in early December.
It would be remiss of me not to acknowledge the concerns raised by the pub sector in recent weeks. As hon. Members will be aware, the Chancellor is looking at what more we can do to support pubs, and further work is under way. The details of that will be announced in the coming days. These further interventions are not formally part of today’s debate, but they are important context: as we consider the draft regulations, we must remember that they are only part of the picture. When taken together, our overall support package will ensure that most properties seeing bill increases will see them capped at 15% or less next year, or £800 for the smallest properties.
As hon. Members will be aware, revaluations are an important and necessary part of the business rates scheme. At revaluations, the rateable value—the estimated annual rental cost—of all 2 million non-domestic properties is uprated to reflect market conditions. At the same time, the multipliers—or tax rates—are adjusted in response to the overall movement in the tax base. To put it simply, if the overall total of rateable value increases at the revaluation, it has a downward pressure on the tax rates, and vice versa. That is why the multipliers for next year will be at a lower rate than they are currently. The new rateable values, which were published by the Valuation Office Agency in draft in November, will be applied from 1 April.
The nature of revaluations means that some ratepayers’ bills will go up, some will stay the same, and of course some will go down. The Government know that, and we know that support is required to help some of those ratepayers seeing increases to move gradually to their new liability over time. That is why we have introduced the generous support package to help ratepayers with their new liability over three years, at the centre of which is the transitional relief scheme we are discussing today.
The transitional relief scheme that the draft regulations will deliver will provide support to around half a million ratepayers that will see their bills rise substantially as a result of the 2026 business rates revaluation. That support will be provided over three years, and is worth about £3.2 billion.
The scheme will cap bill increases that arise due to the revaluation by a set percentage each year; for example, in the first year of the revaluation, 2026-27, the caps in the transitional relief scheme are 5% for small properties, 15% for medium properties and 30% for large properties. The caps are before changes in other reliefs and local supplements, such as the Crossrail supplement charged in London, so changes in actual bills may differ from the caps. As I have said, we have provided further support for properties losing certain other reliefs, such as the current 40% retail, hospitality and leisure relief.
For this revaluation, the transitional relief scheme will provide more generous caps for large properties in years 2 and 3, compared with previous revaluations. The caps will also rise with inflation in 2027-28 and 2028-29, as has been the case previously. Of course, ratepayers’ bills may also change for other reasons, unrelated to the revaluation—for example, if the property has been improved.
At the Budget, the Chancellor announced that to help fund the cost of the transitional relief scheme, the Government would introduce a 1p transitional relief supplement. This will only apply for one year, from 1 April 2026. The impact of the supplement will add only 2% to 3% to the bills of affected ratepayers in 2026-27.
As I have said, it is important to note that the precise increase in bills next year, and in the future years of this rating list, will vary depending on the individual circumstances of each ratepayer and, in later years, on inflation. However, the caps will ensure that large increases are moderated, so that ratepayers have time to adjust to their new bills, as opposed to seeing a very large increase overnight on 1 April 2026. Transitional relief is calculated and applied automatically by local government; ratepayers do not have to contact their local authority to apply for it.
Revaluations are an important and necessary part of the business rates system. By ensuring that rateable values are updated in line with recent market values, we ensure that the burden of business rates is fairly distributed across the tax base in line with market conditions. Equally, we recognise that a large overnight change in their rates bill can be challenging for some businesses. That is why, at the Budget, the Chancellor announced a generous support package worth £4.3 billion, which includes protection to help ratepayers to transition to their new bill, with further support for pubs to be detailed in the coming days. The draft regulations will help to deliver that important support package by implementing the transitional relief scheme, and I commend them to the Committee.
David Simmonds (Ruislip, Northwood and Pinner) (Con)
It is a pleasure to serve with you in the Chair, Mr Turner, for what I think is the first time.
As the Minister outlined, the purpose of the draft regulations is to round off the otherwise larger increases in business rates, but it is important to put that in context. A short time ago, we had a general election, in which the Prime Minister said that there would be a new regime of “permanently lower business rates”. I appreciate that the Treasury is currently hiring a new business rates tax adviser, but this issue is not going away.
In Prime Minister’s questions this afternoon, my hon. Friend the Member for Rutland and Stamford (Alicia Kearns) referred to a 2,000% increase in the business rates applying to one of the pubs in her constituency. Previously, the hon. Member for York Central (Rachael Maskell) had reported that a survey showed an average increase of 41% for hospitality businesses, 44.4% for music venues and 27% for independent shops in her constituency. The body that represents the United Kingdom’s gym and health providers, ukactive, reports an average increase of 60% in the business rates for which its members are liable. The National Pharmacy Association has reported that its members are having to remortgage their homes and put their life savings into their businesses to meet the business rate increases proposed by the Government. To date, over the last 12 months, there have been a net 200,000 job losses in the retail sector, which businesses report are primarily due to increases in business rates and national insurance contributions.
It is clear that that reflects a very substantial, permanently higher rate of business rates and an unwelcome U-turn by the Government. All of us can see the practical impact in our communities, and I would bet that there is not a Member in this room who has not been lobbied by local pubs, cafés and shops about the impact that this is having on their business.
Mr Andrew Snowden (Fylde) (Con)
Does the shadow Minister agree that this is creating a perfect storm and that the reason so many people are getting in touch with us—many MPs on both sides of the House will have owners of pubs, restaurants and bars getting in touch with them—is that this business rates change will crystallise that? In coastal areas like Fylde, people have less money in their pockets, so there are fewer visitors to hospitality venues to start with. Those businesses already face significant cost increases because of changes to national insurance and other changes in the tax system. As a result, these 40%, 50% or 60% changes in business rates will be the final straw for many of those businesses.
The Chair
Order. We have an hour and a half to debate the regulations, but interventions must be a bit shorter.
David Simmonds
My hon. Friend has outlined in very clear terms what any of us in this room could on behalf of our constituencies. There will be different local dynamics, but everywhere is suffering as a consequence of the increased taxes on businesses. Government Members might not wish to hear such messages from Opposition Members—and that is understandable, because this is politics—but they might listen to the hon. Member for Burton and Uttoxeter (Jacob Collier). In Prime Minister’s questions, he said that “any wins” had been “wiped out” by the increase in business rates, compared with what was proposed through transitional relief, and he reported to the House 60% and 70% rises in business rates affecting his local pubs.
I will conclude with some questions for the Minister. First, what is the net benefit of all these measures—the increases in business rates and the transitional relief—to local councils? We know from the local government finance settlement that two thirds of local authorities in England lost net funding from central Government as a consequence. Given the substantial increase in business rates income that this would imply, what will the overall impact on local government funding be?
Secondly, what assessment has the Department made of the impact that this will have on high streets and local businesses in particular? Many of those business have been lobbying us because the family business tax, the rise in national insurance and the interaction with the changes in the point at which national insurance is charged have put huge pressure on them. The impact of these business rates on top of that is enormous.
Thirdly, what role have the local reliefs, which were briefly touched on by the Minister and are set out in the explanatory memo, played in the determination of the funding settlement? Although the fig leaf is offered that local reliefs may be available, it is clear that the Government’s assumption is that all these increases will be implemented in full before any consideration is given to additional funding. What consideration has the Minister given to a return to the local authority business growth incentive business rates regime, which was designed to incentivise local authorities, through additional support from central Government, to look to create opportunities to support local businesses and high streets, in a way that we know was very effective?
The Prime Minister said on 7 January that the Government were in talks to see
“what further support and action we can take.”—[Official Report, 7 January 2026; Vol. 778, c. 260.]
That was days after he acknowledged that as a result of this settlement, pubs and hospitality, in particular, “will struggle.” The question for Opposition Members is, is this it?
The Chair
Before I invite Members to bob if they want to catch my eye, may I ask them to stick strictly within the confines of the draft regulations, please?
Peter Lamb (Crawley) (Lab)
It is a pleasure to serve under your chairmanship, Mr Turner. I am here replacing another Member. When they told me the subject, I said, “Great! It is the first time I have ever actually known something about the subject.” They said, “For goodness’ sake, don’t let the Whips hear you say that”—such is the time in which we live. At the risk of incurring the wrath of Members who would clearly like to get out of this room as quickly as possible, I hope I might be of service to the Government on this issue.
For almost a decade I ran a local authority that collected one of the highest levels of business rates in the country. We are seeing the second highest increase as a result of changes being instituted now—such is the consequence of having a major airport in our patch. However, I am aware that we are likely to hold a vote on this topic, so I would like to frame in people’s minds exactly what is being debated before we get to a vote.
The current system of discounts for the hospitality industry is running out; no additional money has been put forward to fund it—it was not in the Budget. Currently, these things are not done through legislation or statutory instrument, but operate through guidance, with local authorities essentially given discretionary relief and paid back by the Government. If we do not put another arrangement in place, that collapses.
The proposed system delivers a lower rate than the previous system. If Members do not vote in favour of it, a system will come into effect that has a higher level of rates for the hospitality industry—with its level of interest in this—and for businesses that are struggling at the moment than is currently the case. This is the only proposal on the table at the moment.
Mr Snowden
If that is the case, would it not have been better if the Government had had the foresight to put a new system in place to deal with the discounts that existed before, and made some choices about where the pounds are spent—rather than on higher welfare, maybe on supporting businesses?
Peter Lamb
I would be delighted to have a different system in place. In fact, I spent many years as a local authority leader, lobbying the last Government to try to do anything on that front to resolve a system that, frankly, is still Elizabethan in design and in no way reflects the changing nature of local economies. It requires a fundamental review, and I understand from the Minister that we are looking at various changes at the moment, and further measures are being put in place to support people. However, I say to Members in this room today that if this proposal goes to a vote and they vote it down, they will in practice be voting for higher rates on these struggling businesses.
A second thing will happen. During covid, I was leader of my local authority, and businesses were suddenly unable to pay business rates. The liability around business rates is such that, regardless of what we have coming in as a local authority, we have to pay that money to the Government or they will take legal action; that is technically the requirement. My largest donor was Gatwick airport—[Interruption.] Rather, my largest contributor was Gatwick airport; it has not donated any money to me at all. It suddenly found that because aviation was hit so hard, it could not afford to pay its business rates at all. We faced a situation where local authorities in the area could not make payroll under the existing system. When Members vote today, they must therefore be very clear that they are voting to bankrupt not only the hospitality industry, the retail industry and other struggling sectors, but their own local authorities. That is all I will say on that.
If Opposition Members would like to propose something else in the House, we would be more than happy to debate it. However, if this proposal goes to a vote and they vote against it, they will have voted to put a higher rate of taxation on the hospitality industry.
Sir John Whittingdale (Maldon) (Con)
I do not want to repeat the excellent points made by my hon. Friend the Member for Ruislip, Northwood and Pinner, but I have listened carefully to the Minister and I have to say that essentially, this measure is a sticking-plaster over a gaping wound. It is of course the case that specific relief was provided during covid and that was going to come to an end, but it did not have to be removed in its entirety overnight. It is that decision, which is a choice being made by the Government, that has inflicted these enormous rates bill increases on many businesses right across the country, particularly on the high street.
I have been contacted by many of the pubs in my constituency and they have raised concerns about not just the impact of these existing measures, but the Government’s promise that there is some relief coming over the horizon, because it is extremely unclear what that will be. As one example, the pub I visited last weekend had rooms upstairs, so does it qualify as a hotel or a pub, and to what extent is the relief package going to benefit it? Those influences are having a real impact and affecting businesses’ decision about whether they can continue to trade. It is simply not good enough for the Government to say, “Well, in due course we’ll get round to telling them.”
It is not just pubs; I hear the Minister talking about relief coming for pubs, but as my hon. Friend the Member for Ruislip, Northwood and Pinner said, many other kinds of businesses are equally impacted. I am a patron of the Music Venue Trust, which represents grassroots music venues across the country. As I raised with the Exchequer Secretary to the Treasury in the Chamber earlier this week, some of them have not paid rates before and are suddenly facing bills, and others are seeing enormous increases. As the MVT said in its statement on the measures, these are not bills but “closure notices”—these venues will simply not survive.
I take the point made by the hon. Member for Crawley that the measure that we are debating will provide some small relief but it is simply not enough. It is not going to address the real issues that are affecting businesses. I hope the Minister will press her colleagues to introduce those measures and tell us a little more because at the moment there is total uncertainty for businesses and their future.
Zöe Franklin (Guildford) (LD)
It is a pleasure to serve under your chairmanship, Mr Turner. I will keep this brief. I was grateful that the Minister recognised that this issue must be set in its wider context: businesses are struggling. I regularly have conversations with businesses in my constituency and we are getting to the point where the situation could be a closure notice for many, as was mentioned earlier. The Liberal Democrats are particularly concerned that the Government promised to permanently lower business rates for retail, hospitality and leisure, but have failed to use the full powers they gave themselves to deliver support.
We are also concerned about transparency and accountability. Despite repeated parliamentary questions, the Government have not published clear, sector-specific data on the impact of the revaluation, even though the Valuation Office Agency has confirmed that such data was shared with the Treasury. That lack of transparency makes it so much harder for Members to assess what the revaluation really means for their constituencies. That is ever so important where industries, such as hospitality, are a major part of their local economy. We have argued for practical targeted support and we have called for an emergency VAT cut for hospitality, accommodation and attractions. We have also raised concerns about the cumulative impact of alcohol duty and national insurance rises.
Ultimately, we believe the measure set out in this statutory instrument do not go far enough to address the scale of the challenge facing businesses in places like my constituency, but voting against it would be voting against any transitional support at all, so for that reason, while I cannot support it, I will not oppose it. I will abstain and we will continue, as a party, to press the Government to recognise the pressures facing town centres and to take urgent action to protect pubs and jobs. I do push the Government, however, because they need to do more and they need to do what they have promised.
Lewis Cocking (Broxbourne) (Con)
It is a pleasure to serve under your chairmanship, Mr Turner. I welcome the tiny—absolute minuscule—support that the Government are offering in this legislation. We are continually told that most rates will be capped and the changes will not affect most businesses on the high street, but I have not spoken to a single business or pub on my high street that is not seeing a significant increase in its business rates, even with the relief. Let us take the Farmers Boy in Brickendon: its business rates are going to go from £4,000 to £8,000. I do not understand which businesses the Minister or people in the Department are speaking to out there to say that most are not going to see an increase. From the businesses that I speak to, that is simply not true.
We continually hear from the Government, “You guys were in power before the last general election,” but they have had 18 months and they have done nothing. They had 14 years in opposition when they could have come up with a credible plan for government, but they have proved to the people up and down the United Kingdom that they were clearly incapable of doing that. I want to understand from the Minister what the Government will do to support businesses and stop these closure notices—because they are closure notices for many of my constituents in Broxbourne.
Samantha Dixon
Today’s debate illustrates clearly how passionate Members are about their local high streets and the businesses in their constituencies, which I completely recognise. I will try to address Members’ comments.
The introduction of the permanently lower rates for eligible retail, hospitality and leisure properties, paid for by the high-value multiplier, is just the first step in the Government’s programme to transform the business rates system, which the hon. Member for Ruislip, Northwood and Pinner asked me about. In September 2025, the Government published an interim “Transforming Business Rates” report to set out what we will do next to meet our objective of delivering a fairer business rates system that supports investment and is fit for the 21st century. At the Budget, a call for evidence was published on the role of business rates in business investment, which will help us to develop a system that better supports investment and economic growth. The transformation of the business rates system is a multi-year programme happening throughout this Parliament, with much more to come.
I turn to other issues. The hon. Member asked about the impact on local government. We hope that the revaluation will be, as much as possible, neutral. We will adjust the business rates retention scheme to offset the impact on local revenues.
David Simmonds
I am grateful to the Minister for addressing that point. It slightly begs the question, however, if the main purpose of these increases—we have heard about 2,000%, 60% and 27% increases for independent shops, as well as 200,000 job losses—is to raise additional business rates income, but the effect on local government finance is neutral. What on earth is the point of inflicting all that pain on the business sector if it does not put a single extra penny in the pockets of local government?
Samantha Dixon
We do recognise that business rates make up about a quarter of local authorities’ core spending power and they support critical local services, but the revaluations maintain fairness in the system by redistributing business rate liabilities among ratepayers to reflect recent market conditions. Standard features of the business rates tax system mean that between financial years, tax take may increase or decrease due to inflation or changes in relief. Hon. Members will be aware that rates rise in line with inflation and change annually to reflect inflation. On the wider impact on local government, I will respond to the hon. Member for Ruislip, Northwood and Pinner in writing.
Members have raised the issue of the high street. It is important to note that the temporary and unfunded—I repeat unfunded—40% RHL relief for 2025-26 will end on 31 March, and will be replaced by the permanent lower retail, hospitality and leisure tax rates from 1 April. The change, coinciding with the revaluation, means that some retail, hospitality and leisure properties will need greater support to help them transition to their new bill.
We have provided exactly that through expanding the supporting small business relief scheme, which will, as I outlined, cap bill increases for ratepayers who are losing some or all of their small business rate relief, rural rate relief, 2025-26 retail, hospitality and leisure relief, or 2023 supporting small business relief, at the higher of either £800 or the equivalent transitional relief cap. My hon. Friend the Member for Crawley put it most ably: to vote against this particular measure would be to see businesses facing higher bills, which is not what the Government want.
I thank all Members for their contributions to the debate. As my right hon. Friend the Chanceller announced at the Budget, the business rates support package, of which this relief is a part, will help ratepayers facing bill increases as a result of the revaluation to move gradually over time to their new liability. I am grateful for the opportunity to speak on this matter today, and I commend the draft regulations to the Committee.
The Chair
It seems that the Committee may divide on the draft regulations, so let us be clear on what we are discussing. The motion being debated is that the Committee has considered the instrument; it is not a motion to approve the instrument. The House will decide whether to pass a motion to approve the instrument, if such a motion is put before it.
Question put.