The British government has published its Transforming Business Rates: Interim Report, outlining next steps in overhauling a system that has long been criticised for placing a disproportionate burden on high street operators.
While retailers welcome the direction of reform, they are calling for urgent clarity on how promised tax relief will be delivered.
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Government’s approach
The report follows the Chancellor’s Autumn Budget 2024 announcement of permanently lower business rates for retail, hospitality, and leisure (RHL) properties with rateable values under £500,000 from April 2026.
Alongside this commitment, the government signalled its intent to:
- Simplify the system to encourage growth and entrepreneurship.
- Enhance Improvement Relief, supporting businesses that invest in their premises.
- Review the role of the Valuation Office Agency (VOA), including a potential transfer of responsibilities to HMRC.
The government has positioned these reforms as a means to strengthen local high streets, stimulate investment, and maintain a stable revenue stream for local services.
Retail sector reaction
The British Retail Consortium (BRC), representing much of the retail industry, welcomed the government’s recognition of long-standing problems but warned that the detail remains lacking.
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By GlobalDataHelen Dickinson, Chief Executive of the BRC, said the current system is “outdated, overly complex and economically damaging.” She noted that while proposals to improve reliefs and streamline the VOA are encouraging, the sector’s most urgent need is clarity on the permanent rates cut announced in 2024.
Retailers argue the imbalance is stark: they contribute just 5% of the UK economy but shoulder over 20% of the business rates bill. This, the BRC says, has held back investment in stores and jobs.
Implications for retail
The interim report signals progress but leaves key questions unresolved. For retailers, the main implications are:
- Investment delays: Businesses remain cautious, holding back on local expansion and recruitment until the Budget provides clarity.
- Fairness under scrutiny: The sector will closely examine whether reforms genuinely reduce the disproportionate burden on physical retail.
- High street resilience: Lower rates could help sustain town centres, but benefits depend on the speed and scope of implementation.
- Balancing digital and physical: Many retailers remain concerned that online competitors still face a lighter tax burden compared to bricks-and-mortar stores.
Next steps
The government has confirmed that full details of the permanent business rates reduction for RHL properties will be announced in the Autumn Budget 2025.
In the meantime, retail stakeholders are expected to continue pressing for meaningful relief and reforms that create a level playing field.
Looking ahead
The Transforming Business Rates: Interim Report represents an important step towards modernisation. For the retail sector, however, it is only the start.
While there is cautious optimism about the government’s commitment to reform, the lack of clarity on implementation leaves retailers waiting for answers—and delaying the investments needed to revive high streets across the country.
