Consultation outcome

Resetting the business rates retention system technical consultation: summary of responses and government response

Updated 20 November 2025

Introduction

1. As set out in the local government finance policy statement 2026-27 to 2028-29, the reset of the Business Rates Retention System (BRRS) from 1 April 2026 is a core part of the government’s Fair Funding Review (FFR) 2.0 to ensure that the local government funding system is fit for the future.

2. The government ran a technical consultation for 8 weeks from 8 April to 2 June 2025, outlining its proposed approach to delivering a business rates reset, updating government’s assessment of how much business rates are available through updating business rates baselines (BRBs).

3. This document summarises the responses to that consultation and gives the government’s response, including further detail on the policy proposals and methodology for constructing BRBs. This methodology will be introduced at the provisional Local Government Finance Settlement later this year.

4. Additional evidence to support decisions has been published alongside this response in ‘Resetting the Business Rates Retention System from 2026-27’.

Background

5. As part of the FFR 2.0, a reset of the BRRS is planned for 2026-27. The reset will be delivered alongside wider reforms to the distribution of local authority funding - allocating funding where it is needed most.

6. At the reset, the government will remeasure the income each local authority expects to collect from business rates at the start of the new reset period – their new BRBs. This technical consultation set out government’s proposals and asked for sector views on a methodology for the development of new BRBs for implementation of the reset in 2026-27.

Overview

7. The government received 151 responses to the consultation. Of these, 132 came from local authorities representing a range of authority types and geographical areas, including 7 joint submissions. 10 responses came from local authority associations or special interest groups and, 5 responses from internal drainage boards (IDB) authorities or IDB associations, 2 members of the public and 2 other representative groups.

8. A summary of the responses and the government’s response is given below on each question, including its proposed position on that aspect of the BRB methodology. Where the government intends to pursue a method which departs from its original proposals, or has made a decision based on responses to a choice or open question asked to the sector in the consultation, this is clearly stated. A summary table of the finalised BRB methodology can be found in Annex A.

Summary of responses

9. The consultation sought views on 10 questions. Where questions invited respondents to indicate agreement or disagreement, the overall response was positive, with the majority in agreement. Notably, there were high levels of agreement on retrospectively adjusting baselines in Year 2 to improve accuracy via a bespoke data collection in summer 2026 (question 2, 84%), and that the government should not make deductions for reliefs when setting new BRBs, instead compensating separately via Section 31 (s.31) grant (question 4, 88%).

10. Agreement levels on the remaining questions ranged from 60% to 71%. Agreement was higher among local authorities compared to the general response. Where agreement was at lower levels, disagreement was still low (up to 19%). Remaining respondents either had no view or selected ‘Don’t know’.

Question responses

Question 1: Are there matters related to the reset that you believe should be covered in the reset delivery plan which are not mentioned in this consultation?

11. Of those that responded to this question, 92% suggested additional matters they felt should be included in the reset delivery plan but were not addressed in the consultation. While there was clear consensus on the need to consider other matters, the specific suggestions varied widely, with no single issue receiving overwhelming support.

However, a few themes emerged more prominently than others:

• 29% highlighted the need to consider how the reset calculation will affect the levy, safety net, and pooling arrangements – in particular the move to using gross rates payable (GRP) and the potential for more tariff authorities - and to ensure they remain fair, effective, and aligned with the system’s overall objectives
• 28% expressed concerns about the impact of the reset could have on budget setting and planning. The need for early and reliable information to be shared with local authorities to support effective budget setting for 2026-27 was highlighted
• 24% asked for clear, worked examples and exemplifications to support understanding and enable accurate budget forecasting
• 22% raised concerns about the overall complexity of the BRRS and the added burdens expected from concurrent reforms - particularly the introduction of new multipliers

12. Respondents also mentioned matters covered by the recent FFR 2.0 consultation, including the timing and type of resets (35%), transitional arrangements (33%) and tier splits (including increased retention arrangements) (27%).

Government response

13. The government acknowledges the need for certainty for authorities in time for budget setting and planning and has set out within this response document and accompanying publications, as much information on its proposals for design of the upcoming reset, as possible.

14. The response to the FFR 2.0 consultation details the government’s proposed overall approach to the levy and safety net, and pooling. The government notes the interaction of its approach to reliefs within BRBs in lowering top-ups/increasing tariffs or creating new tariff authorities, however this will not have an effect on the levy rate paid by authorities going forward due to a change in how the levy rate and amount of levy to be paid by each authority will be calculated from 2026-27. Detail on how the levy and safety net work are given in the response to the FFR 2.0 consultation and in chapter 4 of Resetting the Business Rates Retention System from 2026-27, published alongside this response.

15. Further information, including exemplifications of the methodology for BRBs will be published at the provisional local government finance settlement.

16. Government also believes that the comprehensive proposals set out here and in Resetting the Business Rates Retention System from 2026-27 reduce the complexity associated with administering the BRRS, for example in the approach the government has adopted to accommodate new business rates multipliers into the BRRS.

Question 2: Do you agree that provision should be built into the reset delivery process in year 2 to retrospectively adjust baselines to improve accuracy via a bespoke data collection in the summer of 2026?

17. There was strong consensus among respondents, with 84% agreement. Of those with views:

• 57% emphasised the importance of prioritising accuracy
• 40% asked for transparency and collaboration when setting provisional and final BRBs, including the ability to review and verify estimates before implementation, including early access to data and methodology for year 2
• 30% expressed concern that significant differences between provisional and final baselines could undermine local authorities’ ability to plan and set budgets effectively and whilst there was broad agreement that a bespoke data collection will be essential, 14% emphasised the need to keep the process as simple as possible to avoid adding further complexity to an already burdensome system
• 19% highlighted the importance of having targeted transitional arrangements to smooth out significant differences between provisional and final baselines, separate from broader transitional measures

Government response

18. Given strong agreement from respondents, the government intends to provide for a retrospective adjustment of baselines in 2027-28, facilitated by a one-off bespoke data collection in summer 2026.

19. The government will work with sector experts to set out a roadmap so that local authorities know the timing and plan for the retrospective adjustment to baselines, setting out clearly, as far in advance as possible, what the likely impacts will be. Indicative timelines were set out in the consultation and are again given below.

20. The government plans to update figures with additional data in 3 areas:

• GRP
• Designated areas (DAs) (updated for post-revaluation baselines and figures used in the calculation of disregarded amounts. The government is considering what data will be needed to deliver this adjustment and will confirm with relevant local authorities what will be needed in due course – see question 8)
• Renewable energy (amounts to be disregarded – see question 9)

21. This data will reflect updates for the underlying compiled list data, as at 1 April 2026; it will not reflect the impacts of the multiplier changes, as the system will be run on a new basis, using the ‘supplement and discount approach’ (see the response to question 3). Local authorities should note that only this data will be updated. All other data used in the construction of BRBs will be fixed as in the 2026-27 baselines (e.g. bad debt data will not be updated for 2025-26 data or certified forms).

22. Where there is a known and exceptional impact on an authority’s financial position which is not included within the compiled list, the government may use this data collection to collect additional data on the extent of this impact. If this is the case, it is possible that a bespoke adjustment could be agreed with government where the impact is certain, out of the authority’s control and materially affects the authority’s income position.

Timings for data collection

23. As set out in the consultation, the government intends to collect this additional data in Summer 2026 (see timeline below). This will be after the compiled list is published and local authorities have been able to determine a measure of GRP, amounts to be disregarded from DAs and renewable energy hereditaments based on the compiled list. This will follow on from the NNDR1 and will be in a similar format to aid billing authorities in completing the collection form.

24. The government acknowledges that even by summer 2026 it may be difficult for authorities to provide fully accurate data, due to the extent of changes to the tax. Billing authorities will be required to produce their best estimate of the data required at the point of collection and are encouraged to get in touch with the department if they envisage that there will be any significant issues in doing so.

Question 3: Do you agree with the government’s proposal to determine GRP using draft VOA list data and SCat codes in 2026-27 and to update this measure for local authority data in 2027-28?

25. There was broad support for the proposal to use draft Valuation Office Agency (VOA) list data and SCat codes to set GRP in 2026-27, with an update to local authority data in 2027-28. 67% of respondents agreed, while only 16.2% disagreed.

26. SCat codes were widely seen as unreliable (72%) but generally accepted as the only practical option for setting provisional baselines. A small number of respondents felt the codes were too unreliable to use, though no practical alternatives were proposed.

27. There was also uncertainty around new multipliers making it difficult for reliable GRP estimates to be produced. A significant number of respondents (38%) raised concerns about the difficulty of accurately estimating baselines due to uncertainty surrounding the new multipliers, threatening the reliability of GRP estimates.

Government response

28. The government intends to utilise VOA list data to measure GRP initially, and to update this for local authority data in 2027-28. However, the government has identified an alternative option for administering the BRRS in future which would remove the need to rely on SCat codes when initially determining GRP at the reset.

29. Following the launch of the technical consultation in the Spring, the government continued to consider the impact that reforms to business rates tax policy will have on the business rates income used to fund local government. The government has engaged sector experts, including its Implementation Working Group (IWG) before settling on the following approach – the ‘Supplement and discount approach’.

30. In 2026-27, the government plans to continue basing the BRRS on the two national tax rates - the Small Business Multiplier (SBM) and Standard Multiplier (SM). The impact of the new lower Retail Hospitality & Leisure (RHL) multipliers and High Value Multiplier (HVM) will not flow through to local government income at the delivery of the reset, or across the multi-year Settlement period.

31. Where the financial impacts of new multipliers that apply to specific cohorts of RHL properties would otherwise result in a loss of income to local authorities, government will pay s.31 compensation. The value of any compensation will be offset by government clawing back any additional revenue that would accrue to authorities as a result of the new HVM.

32. Local authorities will still bill businesses on the basis of new multiplier eligibility, and will collect those amounts from ratepayers in their area. However, a system of supplements and discounts will be calculated for each local authority. Calculations will be generated through existing NNDR data collection processes and net transactions to/from local government will be incorporated into wider s.31 grant compensation paid in connection with the BRRS.

33. More information on administering the BRRS in this way has been published alongside this government response (see chapter 6 of Resetting the Business Rates Retention System from 2026-27). The government believes that this approach to administering the BRRS is in keeping with the long-standing principle that local authority income from business rates should not be affected by tax policy decisions over which they have no control. The government also believes this approach will better insulate the BRRS from potential decisions in future that could adjust ratepayer eligibility for different tax rates. If new tax rates were hard-wired into the BRRS, future tax policy changes would require complex BRRS adjustments to wash through the impact that those tax policy decisions would otherwise have on local government income.

Question 4: Do you agree that the government should not make a deduction for reliefs when setting new baselines, instead compensating for reliefs separately via s.31 grant? Do you see any issues with this approach?

34. There was strong support (88%) for the proposal to compensate for reliefs separately via s.31 grant when setting new baselines, rather than deducting reliefs from BRBs. There was recognition that it would reduce financial volatility and improve budget certainty, simplify the system, make it more adaptable to future policy changes, and enable more accurate year-on-year compensation (30%).

35. More than half of respondents (55%) mentioned that there would be increased accounting and cashflow impacts from compensating for reliefs separately via s.31 grants on the general fund, compared to the current approach which only compensates for specific reliefs via s.31 grant. There were concerns about potentially significant amounts not being spread over two years through the collection fund but hitting in-year in the General Fund. 26% of respondents thought this could impact on local authority finances. One respondent also mentioned that timing differences between the schedules for payments of tariffs and s.31 could impact authorities’ cashflow if tariff amounts increased under this new approach.

36. A fifth of respondents expressed concern that fully reimbursing LAs for reliefs may reduce their incentive to scrutinise claims, risking increased fraud and inconsistent practices.

Government response

37. Given the strong support for the proposal to compensate local authorities separately for reliefs via s.31 grant when setting new BRBs, the government intends to proceed with this approach.

38. The government notes the concern that the increased amounts of compensation hitting the general fund could result in timing and/or cashflow issues, due to the need to account for these amounts via the general fund, rather than the collection fund. The government proposes to mitigate for these accounting issues for s.31 grant within the BRRS system going forward.

39. From 2026-27, s.31 grant paid in relation to the BRRS will now be accounted for via the collection fund, not the general fund. This will mean that authorities will have the ability to spread the impacts of changes in s.31 grant across two years, rather than needing to meet the impact in-year. Further information on this is given in chapter 6 of Resetting the Business Rates Retention System from 2026-27.

40. Further, in response to the concern over the timing of tariff payments and payment of compensation for reliefs, the government intends to adjust the schedule of payments of s.31 grant in respect of the BRRS to better match the schedule of instalments for tariff payments. This will ensure that local authorities are not adversely affected by the change in methodology for compensating for reliefs.

41. Mandatory reliefs in DA arrangements that are not currently compensated for via s.31 compensation will not be compensated for via s.31 grant in future. DA arrangements are not being reset in 2026, and deductions, which will still be in effect, would have been made to DA baselines when these arrangements were initially set up. Due to the combination of these two factors, no changes will be made to how these reliefs are compensated for.

Question 5: Do you agree that the government should use the estimate of future losses on the list used to set business rates multipliers at revaluations, as the sector aggregate quantum, for provisions for appeals?

42. A majority (60%) of respondents supported the government’s proposal to use the estimate of future losses - listed for setting business rates multipliers at revaluations - as the sector aggregate quantum for appeal provisions. Of those that disagreed, the reason was in most cases unrelated to the quantum itself, but to the allocation of the quantum or that local authorities should not bear the risk of appeals. 35% of respondents questioned why local authorities manage appeals locally or thought this should partially or fully sit with central government and small number of respondents thought interest on appeals should also be included (10%).

43. The main themes coming through the consultation centred on the approach to the allocation of the quantum. This included the need to factor in local characteristics when determining how to distribute the quantum (45%), rather than rateable value (RV) alone/a flat percentage, and the potential creation of winners and losers if local variation is not included (38%). 15% of respondents suggested some form of alternative approach or factors to include, including those suggested in the consultation (no./type of hereditament, revaluation change); others included accounting for urban/rural factors, resolution rates and the impact of changes to the tax; 18% suggested that past appeals data could be useful to understand trends.

44. 16% of respondents wanted the government to share its proposed apportionment methodology as early as possible, with clear explanations of the assumptions, data sources, and how the estimate would be applied across authorities. Some of those respondents further suggested that independent, external research should be commissioned to provide additional scrutiny on a methodology.

Government response

45. There was broad agreement to the government’s proposals on the treatment of appeals, and it intends to proceed on this basis:

• to deduct an amount from GRP in the calculation of new BRBs to account for the potential appeal loss between resets
• to exclude losses on earlier lists from a method for predicting appeals
• to use calculations associated with the revaluation to set the quantum. At each revaluation, the government sets out an estimate of future losses in setting business rates multipliers.

46. A small number of respondents raised interest on appeals. The government considers that interest received by local authorities on provisions held in respect of potential future appeals loss would cover most of any potential future payment of interest on such losses in most cases. The government therefore intends not to factor in an adjustment to the quantum for interest.

Relative allocation of the quantum

47. The government proposed to review data on appeals to investigate if a more accurate allocation than the current flat percentage approach could be identified. This review has now concluded.

48. The review explored the relationship between appeals loss (loss of RV) and factors which may drive appeals loss, such as local authority-level RV, past appeals records, reported reliefs, revaluation factor and classification (sector, rural/urban, whether a hereditament is in a national chain). RV was found to be the single biggest factor in determining appeals loss, with inconclusive evidence for other factors. The review uncovered several issues which limit the use of presently available data, for example regression outputs that suggest local authorities with low total RV will have little appeals loss or even appeals gain.

49. Due to data constraints, it was only possible to conduct the review on the 2017 ratings list which limited the analysis. Based on this single data point, the review showed limited relationships to potential explanatory factors outside of RV. The government therefore intends to retain the current methodology and proceed with a flat percentage approach.

50. The government will keep this approach under review as additional data becomes available from more frequent revaluations.

Question 6: Do you prefer a bottom-up approach using LA-specific data or a top-down approach using a LA-average fixed percentage to account for bad debt?

51. There was no clear majority in favour of either a top-down (TD) or bottom-up (BU) approach to accounting for bad debt. Just under half of respondents preferred a TD approach (46%), with 38% preferring a BU approach (this was slightly higher when considering responses from local authorities only - 49% TD, 39% BU). 25% felt that further methodological development or independent analysis was needed to refine both approaches before they could give a clear preference.

52. Reasons given for a TD approach included that it would be consistent even though it may overlook local nuances. Reasons given for a BU approach highlighted it may be more accurate but there was recognition on potential variability. 14% of respondents suggested historical data and trends would be useful in predicting trends but that this was difficult due to volatility, and 23% of respondents suggested that local economic conditions and regional variations would also shape bad debt levels. Some respondents suggested deprivation should be factored in and some suggested that deprivation should not be included in a methodology.

53. It was also suggested by nearly a fifth of respondents that a BU approach could reward inefficiency, whilst a TD approach could incentivise collection improvements and mitigate against different approaches to bad debt across local authorities.

54. The impact of the pandemic on bad debt was also mentioned by 9% of respondents, who suggested that all three suggested data lines used in option 1 or option 2 are affected by the pandemic, confirmed by the government’s own analysis. A few respondents mentioned possible mitigations, including use of a 5-year average including pandemic-affected data, cleansing positive figures or discounting the use of data from the most affected covid years altogether.

55. Seven respondents mentioned a preferred option for which NNDR3 data to use. Of those, 6 suggested use of option 2, and one suggested using line 5 alone. A quarter of respondents were keen to see further research and analysis on bad debt, and/or the issue of zero/positive figures.

Government response

56. Responses to the consultation broadly favoured a TD approach over a BU approach. Use of a BU approach results in counter-intuitive outcomes as described in the consultation (amounts added-to, rather than deducted from, GRP), however a TD approach would ensure consistency and a degree of fairness for authorities where there may have been large one-off changes or whose bad debt figures may increase compared to a historically lower average. Therefore, the government intends to proceed with a TD (top-down) approach.

57. As would be expected due to its nature, bad debt was more affected by the Covid pandemic than many other components of business rates. Coupled with the fact that backward looking data is most suitable for this reset adjustment, the government proposes taking data over a longer time-period than the 3-year average proposed by the consultation and excluding the most affected pandemic years (19/20 to 21/22). The government proposes to take a 6-year average, using 3 years pre-pandemic (16/17 to 18/19) and 3 years post-pandemic (22/23 to 24/25).

58. The government proposes to use bad debt data from lines 4 and 5 from part 2, NNDR3 (‘option 2’). This is because these lines produce a forward-looking prediction of bad debt. They were also favoured by respondents to the consultation and sector experts, and are slightly less impacted by the pandemic than the alternative ‘option 1’ data (lines 3 and 4).

59. Overall, this proposed methodology results in a bad debt adjustment of 0.6%, higher than the 0.5% figure suggested originally in the consultation. No update to this fixed percentage figure will be made for updated NNDR3 data, the deduction will remain fixed at 0.6% of GRP until the next reset.

Question 7: Do you have any comments on the approach to the cost of collection allowance in setting new BRBs?

60. There was strong interest in the government’s approach to the cost of collection allowance in setting new BRBs, with 89% of respondents providing views on the matter.

61. A key theme was the adequacy of the allowance’s quantum, which has remained at £84 million since 2013-14. Among those who responded to the question, a majority (63%) considered this figure to be outdated. Inflationary pressures and the rising costs of administering an increasingly complex system were cited as the main factors contributing to higher expenditure.

62. The consultation noted that the government could explore changing the delivery mechanism for the cost of collection allowance—from the current approach of business rates income deduction to s.31 grant payments. Of those who responded to this question, 35% expressed support for the change.

63. A smaller number of respondents raised several additional points. Of those who answered the question, 26% suggested that, if existing data is not sufficiently accurate, the government should collect new cost data directly from billing authorities. Some recommended keeping the allowance up to date through regular reviews of the quantum (4%) or indexation (22%). Meanwhile, 13% encouraged a review of the methodology used to allocate the allowance among billing authorities.

Government response

64. The government reaffirmed its commitment to maintaining the cost of collection allowance in the consultation. The government also acknowledges that a majority of respondents to the consultation expressed concerns that the current quantum of the allowance is insufficient.

65. After review, the cost of collection allowance will remain at £84 million. However, if tax policy measures result in a permanent and significant increase in billing authority administration costs, an increase to the allowance will be considered in the future. In the interim, the government will aim to cover one-off additional costs that billing authorities incur due to the implementation of the reset and new business rate multipliers through the new burdens process.

66. The government has also considered whether the current delivery method for the cost of collection allowance remains most appropriate or whether a change to this mechanism would be preferable, such as, compensation via s.31 grant. The government has considered consultation responses - and with only a third of respondents advocating for change, and technical issues associated with making such a change - the government considers that the current mechanism remains the most viable one. As a result, the government intends to retain the current delivery method.

Question 8: Do you agree with the government’s proposal to deduct an amount from collectable rates for designated areas?

67. There was broad support for the government’s proposed approach to deduct an amount from collectable rates for amounts retained in respect of DAs, with 60% in favour and only 9% opposed.

68. 23% of respondents considered that the proposed deduction method was technically complex, especially given the number of DAs and the interaction with new multipliers and the revaluation. 16% of respondents emphasised that accurate deductions are crucial to avoid unintended financial consequences, as many local authorities have made long-term investment decisions based on expected income from DAs.

69. A tenth of respondents were concerned about the interaction of the methodology with changes to the multiplier and the revaluation, or about the change in treatment of reliefs within DAs. 23% of respondents called for close working between the government and local authorities that have DAs in developing the methodology to ensure deductions are accurate and fair. It was noted that the government has been working with some local authorities and it was suggested by one local authority that this should be extended to a wider range of local authorities.

Government response

70. The government acknowledges the importance of providing local authorities with increased certainty of future revenues to fund investment to support growth in local areas. This is why it is important that such growth is protected from resets of the system, and that an accurate measure of this growth continues to be deducted from collectable rates, so that this income continues to be retained by eligible authorities ‘outside’ of the core BRRS.

71. Given the majority of respondents agreed that a deduction should be made to collectable rates income for growth in DAs, the government intends to proceed with this approach. The amount deducted will reflect the amount that would have been calculated had additional multipliers not applied from 1 April 2026, using the supplement and discount approach used to run the BRRS from 2026-27 (see question 3 and Resetting the Business Rates Retention System from 2026-27, chapter 6).

72. To calculate the deduction to BRBs, the government will need to use a gross rates measurement as is used for the BRB methodology more widely. This will replace the old ‘net rates’ amount. The calculation will be GRP in the DA adjusted for accounting adjustments (excluding interest on appeals), amounts disregarded relating to renewables hereditaments in the DA, and the DA baseline. This will be done for all DAs held by a billing authority, and then the total amount will be summed up to generate a whole local authority deduction. The inclusion of amounts disregarded for renewables hereditaments is an addition to the formula set out in the consultation; inclusion will improve accuracy and avoid double counting of renewables growth.

73. An initial deduction will be made to BRBs using NNDR3 2024-25 data to calculate the amount of the deduction for interim 2026-27 BRBs; this data will not be adjusted for inflation or the revaluation for the initial BRB calculation. For local authorities with multiplier DAs, these will be summed together to treat each local authority as if they have one overarching DA. The initial data will then need to be updated to set final BRBs in 2027-28 following a bespoke data collection in summer 2026. This will update figures for local authority data which reflects the compiled list and post-revaluation DA baselines. It may be necessary to collect additional data from local authorities through the bespoke data collection to facilitate the most accurate deduction possible for these arrangements at the reset. More information on what will be required from local authorities will be set out in due course and the government will work with relevant authorities to ensure the adjustment made reflects the policy intent of the deduction as far as is practicable.

74. The government acknowledges that the formula set out in the consultation to calculate the disregarded amounts to be deducted from collectable rates for DAs is complex. However, given the majority of respondents agreed with the use of the formula consulted on, and were clear about the importance of accuracy, the government plans to continue with this formula, adjusted as detailed above, noting that it will produce the most accurate result.

75. The government has been working with sector experts and with 5 additional local authorities specifically on DAs in their areas and will continue to do so ahead of sharing initial figures in due course; the government will then engage with the relevant authorities in summer 2026 as part of the data update detailed in the response to question 2.

76. Alongside the revaluation, changes to the multipliers will impact the amount of growth in DAs more broadly. As is the case for setting new BRBs, government proposes to account for these changes via the ‘supplement and discount approach’ as mentioned in the response to question 3. More information on how this will work for DAs specifically is provided in chapter 6 of ‘Resetting the Business Rates Retention System from 2026-27’, published alongside this document.

77. The consultation also indicated that the government would consider the approach to compensating for reliefs in DAs as part of the reset. The government has detailed its proposed update to how this is done within chapter 6 of Resetting the Business Rates Retention System from 2026-27.

Question 9: Do you agree with the government’s proposal to deduct an amount from collectable rates for amounts retained in respect of renewable energy projects?

78. There was support for the government’s proposal to deduct an amount from collectable rates for income retained from renewable energy projects, with 71% agreement, and only 5% disagreement, with broad agreement also on the updating of data in year 2 of the reset. Responses to this question recognised the importance of this type of incentive, aligning with both local and national environmental policy goals.

79. There were no significant themes, however, in similarity to question 8, the importance of these arrangements to local authority finances was raised (8%) with some emphasising that this income supports long-term investment planning, and any reduction could undermine confidence in future projects.

80. 3 respondents raised concerns about the use of historic data, especially when this is not being used in setting other aspects of new BRBs, and there was a call for more detail on the methodology (4%) and more engagement with affected authorities (2%).

81. The consultation mentioned that the government intended to make an assumption in the methodology for deduction for renewable energy projects - that the value of reliefs is minimal on renewable energy hereditaments and therefore could be excluded. Only 2 respondents mentioned this point and agreed that this was likely to be minimal, though one suggested sampling could be undertaken to check this assumption.

Government response

82. Given the strong agreement on its approach to dealing with renewable energy projects in constructing new BRBs at the reset, the government intends to proceed with its proposed approach. A deduction will therefore be made from collectable rates for each authority with eligible renewable energy hereditaments.

83. As is the case for DAs, changes to the multipliers and the effect of the revaluation will affect renewable energy hereditaments and the amount of growth retained outside of the BRRS. The government proposes to use its wider approach for dealing with the changes to the multipliers - the ‘supplement and discount approach’ - to strip out any increase or decrease in income in renewable energy scheme hereditaments resulting from this change. This will also mean the amount to be deducted from final BRBs will reflect an effective continuation of the SBM and SM.

84. To do this, it will be necessary to adjust the Non-Domestic Rating (Renewable Energy Projects) Regulations 2013 (as amended) (“Renewables Regulations”), to ensure that amounts to be disregarded in respect of each hereditament reflect the position the hereditament would have been in, had the RHL multipliers and HVM not been introduced. The government intends to make changes to the Renewables Regulations in early 2026 to apply from 1 April 2026, and will draft amendment regulations which it will consult relevant authorities on in due course.

85. The government will, as suggested in the consultation, proceed in 2026-27 with unadjusted holding data obtained from the NNDR3 2024-25. This will then be revised at the 2027-28 Settlement, with retrospective effect to 1st April 2026. This will update BRBs using data submitted by local authorities as part of a bespoke data collection in Summer 2026 and will work through the top-up/tariff ‘reconciliation factor’ for 2027-28. The deduction to collectable rates implemented in 2027-28 will reflect the impact of the compiled list and any changes in baseline(s) following the revaluation, but it will exclude the impact of the new multipliers.

86. Any loss or gain as a result of the new multipliers will then be paid to authorities or netted off general s.31 compensation in the BRRS, as is detailed in chapter 6 of Resetting the Business Rates Retention System from 2026-27. The approach to designated hereditaments differs from DAs. Amendments to the Renewables Regulations can be made, which sets the amount to be disregarded as if the new multiplier ‘supplement’ or ‘discounts’ do not exist. This is in contrast to DAs, where the amounts relate to disregarded amounts which cannot be readily changed and therefore must only be netted off s.31 grant paid in regard of the DA.

87. Notional 2013 baselines for renewable energy hereditaments will need to be revised as set out in the Renewables Regulations, to calculate the amounts to be disregarded from 1 April 2026. Given that the notional baseline is an RV figure, this does not need to be adjusted for the effect of the multipliers itself.

Question 10: Do you have any views on the potential impacts of the proposals in this consultation on persons who share a protected characteristic?

88. The majority of respondents (68%) offered no view on the potential impacts of the proposals on individuals who share a protected characteristic. For those who shared a view:

• 39% highlighted that where there was a reduction in funding, this could disproportionately impact on persons who share a protected characteristic, especially where the communities affected contain a higher proportion of those in protected groups
• 33% warned that funding cuts could threaten vital services - with social care, housing, and support programmes specifically mentioned as services that disproportionately support people with protected characteristics. Some called for safeguards to be built into the funding model to prevent adverse impacts on these essential services
• 45% thought that the proposals as part of broader reforms would better reallocate funding – in particular business rates growth - to areas with the greatest need. This assumed that the government’s assessment of need would align with councils facing the highest service demands, and that individuals with protected characteristics are more likely to rely on public services.
• Some respondents said that it would be difficult to ascertain the impacts without understanding the financial impacts of the proposals on local authority funding
• Responses did not generally identify impacts on specific protected characteristic groups, though a few respondents mentioned that reforms may affect the funding available for services that support vulnerable groups, including those with disabilities, older individuals, or minority communities

Government response

89. The government acknowledges that it is was not possible for authorities to fully identify potential impacts of these proposals on those who share protected characteristics before the financial impact of the wider reforms and transitional arrangements, are known for each authority. The impact will differ between authorities depending on the projected impact on each authority, and authorities’ own local decisions, and how those impact on those who shared protected characteristics.

90. The government will consider the impacts of the wider funding reforms more broadly on those who share protected characteristics and will publish an equalities impact assessment on local government finance reforms as part of the Fair Funding Review 2.0 response.

Annex A: Summary of the finalised Business Rates Baseline methodology

Baseline component	Summary of proposed method
Gross Rates Payable (GRP)	The government will calculate initial GRP figures to feed into interim 2026-27 Business Rates Baselines (BRBs), which it will then revise ahead of 2027-28 once compiled rating list data is available, to calculate final 2026-27 BRBs. The government will use Valuation Office Agency draft rating lists to determine total ratable value (RV) for each billing authority area. It will apply either the small business rate multiplier (SBM) or the standard multiplier (SM) to each hereditament to derive a GRP position for the billing authority area. the government will compensate local authorities for the rates ‘discount’ compared to what would have been collected by a local authority if a property paid the SBM or SM, vs the Retail, Hospitality and Leisure (RHL) multiplier billed. Local authorities will return ‘supplementary’ amounts to government where they are attributable to extra revenues generated from the High Value Multiplier (HVM) compared to the relevant national multiplier. More information on the supplement and discount approach is given in chapter 6 of Resetting the Business Rates Retention System from 2026-27.
Reliefs	Business rates reliefs will be excluded from the calculation of BRBs. No downward adjustment will be made to GRP for reliefs. Instead, government will compensate local authorities annually for their share of any mandatory or funded discretionary relief awarded locally via section 31 (s.31) grant payments. This will mean that new BRBs will be notional figures and will be higher than the actual income collected in each local authority, meaning tariffs are higher and top-ups lower for all authorities than under a ‘net rates payable’ approach to setting BRBs. This will be offset by s.31 compensation and given a new approach to the levy and safety net (see chapter 4 of Resetting the Business Rates Retention System from 2026-27), there will not be an impact from higher notional BRBs on the levy rate. To aid local authority cashflow positions, the government is changing the accounting treatment required for s.31 grants related to the Business Rates Retention System (BRRS); these amounts will go through the Collection Fund from 2026-27, instead of the General Fund. Further, the government intends to adjust the schedule of payments of s.31 grant in respect of the BRRS to better match the schedule of instalments for tariff payments. An estimate of the aggregate England-level relief cost will still need be made to calculate the aggregate England-level BRB figure, used to determine total Baseline Funding Level (BFL) (see chapter 3 of Resetting the Business Rates Retention System from 2026-27).

Accounting Adjustments

Baseline component	Summary of proposed method
Appeals	The government will apply a downward adjustment to GRP to account for the potential appeal loss between resets. It will determine an aggregate England quantum for this deduction using calculations for estimated appeals losses that are built into business rates multipliers at a revaluation, and the quantum will be allocated out between local authorities to determine individual deductions. This value will exclude losses on earlier lists and will not factor in interest on potential future repayments. The government will use a flat percentage approach to allocate the quantum between local authorities.
Bad debt	The government will apply a top-down adjustment to GRP to account for losses in rates income due to bad debt. Following analysis of historic bad debt trends, the government will make a deduction to each local authorities’ GRP figure of a 0.6% of its GRP. This fixed percentage is based on an average of NNDR3 Part 2 data (lines 4 and 5) and will represent a 6-year average using 3 years pre-Covid-19 pandemic (2016-17 to 2018-19), and 3 years post-pandemic (2022-23 to 2024-25), therefore excluding the years most affected by the pandemic. No update to this fixed percentage will be made for updated NNDR3 data; the deduction will remain fixed at 0.6% of GRP until the next reset.

Other deductibles

Baseline component	Summary of proposed method
Cost of collection	The government will apply a downward adjustment to the equivalent ‘collectable rates’ figure for each local authority (GRP minus accounting adjustments) for the cost of collection allowance. The amount of this deduction will be £84 million. The allocation methodology currently used to distribute this quantum will be largely retained, subject to adjustments to align with wider adjustments as part of the Fair Funding Review 2.0.
Designated Areas (DAs)	The government will apply a deduction in the calculation of BRBs for each local authority that has a DA(s). The amount deducted will reflect the amount that would have been calculated had additional multipliers not applied from 1st April 2026, using the supplement and discount approach used to run the BRRS from 2026-27 (see chapter 6, Resetting the Business Rates Retention System from 2026-27). To calculate the amount of the deduction, a gross rates measurement will be used to align with the BRB methodology more widely. The calculation will be GRP in the DA adjusted for accounting adjustments (excluding interest on appeals), amounts disregarded relating to renewables hereditaments in the DA, and the DA baseline. An initial deduction will be made to BRBs using NNDR3 2024-25 data to calculate the amount of the deduction for interim 2026-27 BRBs; this will then be updated to set final BRBs in 2027-28 following a bespoke data collection in summer 2026. This will update figures for local authority data which reflects the compiled list and post-revaluation DA baselines. It may be necessary to collect additional data from local authorities through the bespoke data collection to facilitate the most accurate deduction possible for these arrangements at the reset. More information on what will be required from local authorities will be set out in due course.
Renewables	The government will apply a deduction to the equivalent ‘collectable rates’ figure for each local authority which has designated a renewable energy projects hereditament(s) in the calculation of BRBs. As with DAs, the amount deducted will reflect the amount that would have been calculated had additional multipliers not applied from 1st April 2026, using the supplement and discount approach used to run the BRRS from 2026-27 (see chapter 6, Resetting the Business Rates Retention System from 2026-27). NNDR3 24-25 data will be used to calculate deductions for interim 2026-27 BRBs; this will be updated for local authority data which reflects the compiled list and post-revaluation baselines, where relevant, to determine final BRBs in 2027-28 following a bespoke data collection in summer 2026. It will be necessary to adjust the Non-Domestic Rating (Renewable Energy Projects) Regulations 2013 (as amended) to apply the supplement and discount approach. The government intends to make the required amendments in early 2026 and will consult relevant authorities on these in due course.