In his first Budget on 28 October 2026, the Chancellor, John Healey, announced that the Small Business Rate Relief threshold for retail, hospitality and leisure property will rise from £12,000 to £18,000 of rateable value. The Treasury's figure is that around 70,000 more businesses will pay no business rates at all; the Chancellor put it as "half of our shops, restaurants and gyms". Retail, hospitality and leisure businesses above the new threshold will have their rates frozen in real terms for two years, so none faces an above-inflation rise.
This page sets out what was announced, what is still to be confirmed, and what it means in practice for ratepayers across Surrey, the South of England and London. We will update it as the Budget documents and the Valuation Office guidance are published.
What was announced
- Threshold raised to £18,000. The rateable value below which qualifying retail, hospitality and leisure property pays no business rates rises from £12,000 to £18,000.
- Around 70,000 businesses taken out of rates. The Treasury's estimate of the number of properties that move from paying something to paying nothing.
- Two-year real-terms freeze. For retail, hospitality and leisure property above the threshold, the bill will not rise above inflation for two years.
- Pubs, clubs and live music venues. The 20% cut to business rates for these premises from April 2027, announced by the Prime Minister in July, stands alongside the new measures.
The measures are paid for by a rise in Machine Games Duty from 20% to 25% and by making online marketplaces responsible for collecting VAT from the sellers who trade through them. The proposed higher rate for large out-of-town warehouses, floated before the Budget, was dropped.
What has not been confirmed yet
The announcement came in the speech. The detail comes in the Budget documents and, later, in the regulations and the Valuation Office guidance. Three things in particular are not yet clear and matter a great deal:
The start date. The most likely date is 1 April 2027, the start of the next rates year, but the Budget papers will confirm it.
Whether there is a taper. Under the current scheme, relief is 100% up to £12,000 and then tapers away to nothing at £15,000. Whether the new scheme tapers above £18,000, and to what figure, decides how many businesses just above the line get partial help and how sharp the cliff edge is.
How "retail, hospitality and leisure" is defined. The new threshold is for these sectors, not for all small business property. The definition will almost certainly follow the one already used for the two lower retail, hospitality and leisure multipliers introduced in April 2026, which turns on how the property is mainly used. Offices, workshops and industrial units are not covered by this announcement.
Why your rateable value now matters more, not less
A higher threshold sounds like a reason to stop thinking about business rates. For many high-street businesses it is the opposite. The threshold is set in rateable value, and rateable value is an estimate made by the Valuation Office from a description of your property that may be years out of date.
A shop assessed at £18,500 pays rates. The same shop at £17,900 may pay nothing. The difference is a few square metres of sales area, an upper floor valued as retail when it is only storage, or a zoning adjustment that was never applied. Before the Budget, correcting an error like that was worth a few hundred pounds a year. From the start date, for a business sitting just above the line, it may be worth the whole bill.
The same applies in the other direction. Every assessment on the 2026 list was produced without anyone visiting most properties. Across Surrey, retail rateable values rose by around 10% on average at the revaluation, and in some districts by more. A unit that was comfortably under £12,000 on the old list may now be assessed at £13,000 or £14,000, and so may already have lost relief it would keep under a correct assessment.
If your rateable value is anywhere between about £15,000 and £25,000 and the property is a shop, café, restaurant, pub, salon, gym or similar, it is worth having the assessment looked at properly before the new threshold takes effect. Our guide to what to look for on your rateable value explains where the errors usually are.
Make sure the property is in the right category
The new threshold and the lower multipliers both depend on the Valuation Office treating your property as retail, hospitality or leisure. That classification follows the description in the rating list, and it is not always right: a café recorded as an office, a showroom recorded as a warehouse, a mixed unit where the retail element has been missed. If the category is wrong, the relief will not reach you however small the property. Checking the description is part of any review we carry out, and it is one of the facts a Check can correct.
For businesses above the threshold
If your retail, hospitality or leisure property is above £18,000, the two-year freeze limits the increase in your bill but does not reduce it. The rateable value underneath the bill is fixed for the life of the 2026 list unless it is challenged, so the freeze is not a reason to accept an assessment that is too high. It simply means the saving from a successful Challenge is a saving on a bill that would otherwise have stayed flat in real terms, rather than one that would have risen with inflation.
For offices and industrial property
Nothing in the Budget changes the position for offices, workshops, industrial units or warehouses. The 2026/27 multipliers and the £500,000 high value multiplier remain as they are, and the only route to a lower bill remains a correct rateable value through Check, Challenge and Appeal. The dropped warehouse surcharge removes a threat rather than offering a saving.
What to do now
- Find your rateable value on the Valuation Office's find and check service. If it is anywhere near the new threshold, note the figure and the description the Valuation Office holds.
- Do not wait for the start date. A Check and Challenge on the 2026 list takes months, and the Valuation Office has up to 18 months to decide a Challenge. A case started now has a far better chance of being settled before the new threshold applies than one started next spring.
- Check the category. If the property is not described as the retail, hospitality or leisure use it actually has, that needs correcting regardless of the figure.
- Ask us to look. Send us your address or your rates bill and we will tell you, without charge, whether there is a case worth pursuing. We act for retail and hospitality ratepayers across Surrey, the South of England and London, on no upfront fee: a share of what we save you, or a fixed fee agreed in advance.
We will update this guide when the Budget documents confirm the start date, the taper and the sector definitions.
Chartered Surveyor. Twelve years in business rates at Altus Group (now Ryan), four of them as a Director, and more than fifteen years of rating work across the South of England and London. RICS-regulated firm no. 897221.
Not sure whether your assessment is right?
Send us the rates bill or just the property address. We will look at the published assessment and tell you honestly whether there is a case worth pursuing. There is no charge for that first view.
Get in touchThis article is general information about how business rates work in England, written for ratepayers. It is not advice on any particular property, and the rules change. If a decision turns on it, take advice on the facts of your own case.