Guidance

Budget 2025: Retail, Hospitality and Leisure Factsheet

Updated 30 January 2026

Business Rates

• For businesses who have seen a large bill increase at revaluation, as we recover from COVID, we are taking action to cap bill increases through Transitional Relief and a new, expanded Supporting Small Business scheme. This factsheet sets out that support in more detail.

• Properties get revalued in business rates every 3 years. April 2026 is when the next values take effect and will be based on property values in 2024, independently assessed by the Valuation Office Agency. The previous valuation was in the middle of the pandemic, and so lots of business are seeing big increases in their Rateable Values to reflect post-COVID recovery.

• Because values have gone up, this government has been able to reduce the rate of tax (known as the ‘multiplier’) for every business. We’ve gone even further for retail, hospitality and leisure (RHL) businesses:

• The tax rate for small RHL properties will fall by nearly 12p next year.

• The tax rate for all other RHL properties below £500k will fall by 12.5p next year.

• This is a big deal – it is a permanent tax cut worth nearly £900 million per year and benefitting over 750,000 RHL properties. Unlike the current RHL relief, the new rates are permanent, giving businesses certainty and stability, and there will be no cash cap, meaning all qualifying properties on high streets across England will benefit.

• We are paying for this tax cut through higher rates on the top one per cent of the most valuable properties. Large distribution warehouses, such as those used by online giants, will pay around £100 million more in 2026/27, with this going directly to lower bills for in-person retail.

• But this fall in the tax rate isn’t big enough to offset the impact of new post-COVID valuations, plus the ending of the temporary relief that many RHL businesses benefit from that has been winding down since COVID. So, we are implementing some big protections for such businesses.

• First, we are implementing ‘Transitional Relief’, which caps the amount that bills increase by for businesses who would otherwise have seen big increases.

• The Transitional Relief caps will be as follows for properties with a rateable value of:

• Up to £20,000 (£28,000 in London): in 2026-27 – 5%, in 2027-28 – 10% (plus inflation), in 2028-29 – 25% (plus inflation). 

• £20,001 (£28,001 in London) to £100,000: in 2026-27 – 15%, in 2027-28 – 25% (plus inflation), in 2028-29 – 40% (plus inflation).  

• Over £100,000: in 2026-27 – 30%, in 2027-28 – 25% (plus inflation), in 2028-29 – 25% (plus inflation).  

• Note: These caps are applied before changes in other reliefs and local supplements.

• Secondly, for any business whose value has increased so that they are no longer eligible for small business rates relief – which provides up to 100% relief from business rates for small businesses – we are capping their increase at the higher of £800 or the relevant Transitional Relief percentage cap for a property of their value, before changes in other reliefs and local supplements.

• Thirdly, we are also capping the bill increases of properties losing RHL relief at the higher of £800 or the Transitional Relief cap for a property of their value to support RHL properties as they transition to permanently lower tax rates. This cap applies to their current bill including the 40% relief they are currently receiving, before changes in other reliefs and local supplements. This represents a further £1.3 billion of support for over 200,000 RHL properties, including independent pubs and family-owned grocers.

• Overall, we’re spending £4.3 billion of taxpayer money on a support package. This includes protection for businesses who would otherwise have seen sharp increases in bills next year.

Regulatory action

• We are encouraging licensing authorities in England and Wales to ease licensing conditions on hospitality businesses, as set out in the first National Licensing Policy Framework, and increasing the number of temporary events they can hold. We will also explore further planning reforms to make it easier for these businesses to expand and grow.

• We are looking to ease the regulatory burden on retailers, including on food and product standards, and making improvements to the pEPR.

• To ensure these reforms deliver, we will also appoint a new Retail and Hospitality Envoy to champion these businesses within government.

Case studies

Case study 1: Independent shop with a rateable value of £30,000 in 2023, rising to £39,000 in 2026

In 2025/26, for an independent shop with a rateable value of £30,000, the business rates liability was calculated by multiplying the rateable value by the multiplier of 49.9p, and then deducting the 40% RHL relief.  

Before the RHL relief, the shop’s bill would be £30,000 x 0.499 = £14,970. The RHL relief would be worth 40% x £14,970 = £5,988, meaning the shop’s final bill would be £14,970 - £5,988 = £8,982.  

Due to the 2026 revaluation, the rateable value of the shop has increased from £30,000 in 2025/26 to £39,000 in 2026/27. The independent shop is eligible for the new permanently lower small business RHL multiplier of 38.2p in 2026/27, so before any reliefs, the shop’s bill would be £39,000 x 0.382 = £14,898.  

To help smooth the transition to the permanently lower RHL multipliers, the government is also providing relief through the Supporting Small Business scheme for properties losing their RHL relief in 2026/27. This means that the shop’s bill increase in 2026/27 compared to 2025/26 is capped at the higher of £800 or the relevant Transitional Relief cap (in this case, 15%). 

15% of the 2025/26 bill of £8,982 would be £1,347, which is higher than the £800 cap. So, in this case the 15% cap applies. The shop’s final bill will be £8,982 + £1,347 = £10,329. This is £4,569 lower than the £14,898 bill the shop would have seen without the government’s package of support, including Supporting Small Business relief.

Case study 2: Independent shop with a rateable value of £50,000 in 2023, rising to £110,000 in 2026

In 2025/26, for an independent shop with a rateable value of £50,000, the business rates liability was calculated by multiplying the rateable value by the multiplier of 49.9p, and then deducting the 40% RHL relief.  

Before the RHL relief, the shop’s bill would be £50,000 x 0.499 = £24,950. The RHL relief would be worth 40% x £24,950 = £9,980, meaning the shop’s final bill would be £24,950 - £9,980 = £14,970. 

Due to the 2026 revaluation, the rateable value of the shop has increased from £50,000 in 2025/26 to £110,000 in 2026/27. The independent shop is eligible for the new permanently lower standard RHL multiplier of 43p in 2026/27, so before any reliefs, the shop’s bill would be £110,000 x 0.43 = £47,300.  

To help smooth the transition to the permanently lower RHL multipliers, the government is providing relief through the Supporting Small Business scheme for properties losing their RHL relief in 2026/27. This means that the shop’s bill increase in 2026/27 compared to 2025/26 is capped at the higher of £800 or the relevant Transitional Relief cap of, in this case, 30%.  

30% of the 2025/26 bill of £14,970 would be £4,491, which is higher than the £800 cap. So, in this case the 30% cap applies. The shop’s final bill will be £14,970 + £4,491 = £19,461. This is £27,839 lower than the £47,300 bill the shop would have seen without the government’s package of support, including Supporting Small Business relief.

Case study 3: Independent shop with a rateable value of £15,000 in 2023, rising to £20,000 in 2026

In 2025/26, for an independent shop with a rateable value of £15,000, the business rates liability was calculated by multiplying the rateable value by the multiplier of 49.9p, and then deducting the 40% RHL relief.  

Before the RHL relief, the shop’s bill would be £15,000 x 0.499 = £7,485. The RHL relief would be worth 40% x £7,485 = £2,994, meaning the shop’s final bill would be £7,485 - £2,994 = £4,491. 

Due to the 2026 revaluation, the rateable value of the shop has increased from £15,000 in 2025/26 to £20,000 in 2026/27. The independent shop is eligible for the new permanently lower small business RHL multiplier of 38.2p in 2026/27, so before any reliefs, the shop’s bill would be £20,000 x 0.382 = £7,640.   

To help smooth the transition to the permanently lower RHL multipliers, the government is also providing relief through the Supporting Small Business scheme for properties losing their RHL relief in 2026/27. This means that the shop’s bill increase in 2026/27 compared to 2025/26 is capped at the higher of £800 or the relevant Transitional Relief cap of, in this case, 5%.  

5% of the 2025/26 bill of £4,491 would be £225, which is lower than the £800 cap. So, in this case the £800 cap applies. The shop’s final bill will be £4,491 + £800 = £5,291. This is £2,349 lower than the £7,640 bill the shop would have seen without the government’s package of support, including Supporting Small Business relief.

Businesses may see a Transitional Relief Supplement in bills: however, when a property is receiving Transitional Relief or Supporting Small Business scheme, they will not pay the supplement, as bill increases are capped by these reliefs.