Draft Non-Domestic Rating (Chargeable Amounts) (England) Regulations 2026
(Limited Text - Ministerial Extracts only)
Read Full debateThe 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.
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.