Transforming Business Rates – HMT publishes its Interim Report

Consultation responses reported that Business Rates are one of the most influential factors in decision making and are acting as a barrier to investment where investment that improves property also increases the tax liability. Changes to the tax rate, structure and reliefs have the ability to improve investment incentives.

HMT reiterated its plans to adjust multipliers in the Autumn Budget and considers there to be a case to explore a fundamental change from a ‘slab’ (where a single multiplier is paid on the full Rateable Value) to a ‘slice’ system with marginal tax rates.

Consultation responses called for Business Rates reliefs to be reviewed. In particular, the rule that removes access to Small Business Rates Relief (SBRR) when a business opens a second property, the scope of Improvement Relief and eligibility of Empty Property Relief. These factors were identified as discouraging investment and growth.

In response, HMT will consider enhancing the Improvement Relief, once more data becomes available, and SBRR to support business growth and investment. HMT has also committed to delivering a transitional relief package for the 2026 revaluation to protect businesses from large bill increases as a result of increasing Rateable Values.

Stakeholders outlined concerns about the application of the R&E methodology for particular property types, which can result in uncertainty and impacts investment. In response, HMT has committed to considering these concerns and options to address them ahead of the 2029 revaluation.

The consultation highlighted the degree of uncertainty provided by Business Rates revaluations, the check, challenge, appeal process and multiplier adjustments at revaluation. HMT ruled out increases to revaluation frequency and will explore the possible benefits of shortening the Antecedent Valuation Date in the future. It will also use the merger of the Valuation Office Agency (VOA) with HMRC to pursue administrative changes that help ratepayers.

In the second phase of targeted engagements, HMT will continue to work with stakeholders on the design of the Business Rates changes. The Chancellor will provide a further update at Autumn Budget 2025, taking into account the draft 2026 revaluation outcomes, local government funding and the economic and fiscal context.

The Autumn Budget is expected to confirm multiplier rates for 2026-27 and announce details of the transitional relief scheme. New multipliers will come into effect from April 2026.

By the end of the year, the functions of the VOA are also expected to have been moved into HMRC.

If you wish to understand the impact of Business Rates policy changes on your business, we would be happy to discuss this with you. KPMG in the UK is in a unique position to provide support. Our combination of regulatory, industry and business rates experience means that we are well equipped to assist with estimating the impact of business rates policy changes on your business. Please reach out to the authors or your usual KPMG contact with your queries.

For further information please contact:

• George Hay
• Rebecca Bell