Adapting to Change: The Future of Business Rates for High Street Shops

The House of Lords recently voted for a number of amendments to the the Non-Domestic Rating (Multipliers and Private Schools) Bill. This bill seeks to adopt a new larger multiplier for properties with a rateable value above 500,000 to pay for a permanent retail discount from April 2026.

Find out more here in our Insight post on the Non-Domestic Rating (Multipliers and Private Schools) Bill.

The explanatory notes for this Bill make it extremely clear what the intention of this policy is:

"the government announced an intention to fund [lower multipliers for retail, hospitality and leisure properties] by introducing ... higher multipliers on properties with rateable value £500,000 or more, which includes the majority of large distribution warehouses including those used by online giants"

The House of Lords amendments sought to exclude properties used for healthcare from the higher multiplier as well as anchor stores. They also wanted to include properties used for manufacturing within the lower multipliers; stressing that manufacture is a crucial part of the supply chain and increases to their bills will have a knock on effect to the High Street.

Earlier this week The House of Commons voted to disagree with all amendments "because the Lords Amendment interferes with the public revenue and affects the levy and application of local revenues, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient."

As it seems to be that the original version of the bill is advancing forward, we wanted to take a look at recent data published by the Valuation Office Agency and analyse whether this Bill sans amendments is meeting its expressed goals and actually within the public interest.

The data provides a stock of all properties with a rateable value above 500,000 organised by sector giving an insight into the type of properties being affected by this policy change.

What the data says

The data shows there are a total of circa 16,780 properties with a rateable value above 500,000.

Of that number, only 1,490 are described as "Large Distribution Warehouses" or "Storage Depot".

This is actually less than the 2,160 used for public services such as schools, hospitals, libraries, courtrooms and police stations.

Further, the new retail, hospitality and leisure discount only applies to properties with a rateable value under 500,000. So any retail business with property above that threshold- such as any department store, any theme park, any business with a flagship shop or the anchor stores, crucial to their surrounding economies, will also be paying the larger multiplier.

4,800 properties fall into a retail, hospitality or leisure description within this data accounting for over £5,400,000,000 in rateable value.

As the House of Lords intended to address, properties integral to retail, hospitality and leisure supply chains such as factories and bakeries will be caught by this increase, inadvertently causing more harm to the high street.

This data is based on rateable values in March 2024. These changes are set to take place from 2026, which is also the time every property is set to be revalued. Currently, rateable values are based on financial data from 2021- with 2023 rateable values intending to be a reflection of a down market still reeling from the effects of Covid.

Even with that in mind, the 2023 revaluation still saw rateable values increase by 7.1% on average. There is little doubt that in the 2026 revaluation rateable values will rise and even more properties will be captured by this higher multiplier.

The multipliers

It has yet to be announced what the larger multiplier will be, however, we know it can be at most 0.1 higher than the standard multiplier and we know the retail multiplier can be up to 0.2 lower.

Assuming a standard retail multiplier 0.2 lower than the current standard multiplier of 0.546 (so 0.346) and a large multiplier 0.1 higher than the standard multiplier (so 0.646), there is a huge swing for even a very minor difference in size.

For example, a retail property with a rateable value of 495,000 could be paying £171,270, whilst a retail property with a rateable value of 500,000 could be paying £323,000. This is almost approaching double the amount paid for a 5,000 rateable value difference.

Rateable value	Current multiplier	Charge	Potential multiplier	Potential charge
495,000	0.546	£270,270	0.346	£171,270
500,000	0.546	£273,000	0.646	£323,000

Spread across the entire retail, hospaility and leisure industries, we can see based on the above numbers (4800 properties with a total rateable value of £5,400,000,000) the average large retail property has a rateable value of 1,125,000. An increase of 0.1 to the multiplier is going to mean a six figure increase to business rates bills for impacted retail businesses.

Conclusions

It is hard to look at this data and think this is a tactile approach being handled with the requisite fragility. The large multiplier actually impacts public services and retail property more than it impacts the intended large distribution warehouses.

Further, there is a substantial cliff edge created for retail properties flirting with a 500,000 rateable value.

There is an element of discretion within the Bill providing caps as to what the multipliers can increase/decrease by, the Government has made clear they intend to see the outcome of the 2026 revaluation before announcing the multipliers. The hope is that with the wiggle room that has been inbuilt into this Bill, a level of discretion can be applied to achieve the desired goals.

If you have any questions about the data, the new multipliers or anything business rates related, please feel free to get in touch with us on 0208 0950 990 or info@hollowaybond.co.uk.