Budget lifts rates relief to £18,000: 70,000 high street firms pay nothing

Chancellor John Healey used his first Budget on Wednesday 28 October 2026 to raise the threshold for Small Business Rate Relief on retail, hospitality and leisure premises in England from a rateable value of £12,000 to £18,000. The Treasury says the change will take around 70,000 more high street businesses out of business rates altogether from April 2027, while every other qualifying shop, pub and café in England gets a two-year freeze in real terms on its rates bill.

The package is being paid for partly by a new duty on online marketplaces to collect VAT from larger UK sellers, and partly by a higher tax on high-stakes gaming machines. Independent retailers and convenience store groups welcomed the move, while the British Retail Consortium called it “a smoke and mirrors announcement” for the larger chains that pay most of the sector’s rates. This article sets out exactly who qualifies, how much a typical shop could save, how the measures are funded and what owners should do before April.

What did the Chancellor announce on business rates?

The headline measure is an increase in the Small Business Rate Relief (SBRR) thresholds for qualifying RHL properties in England. According to the Budget document, the threshold for 100% relief rises to a rateable value of £18,000 and the upper limit for tapered relief rises to £21,000, both from 1 April 2027. The government says the new levels will be “kept under review alongside the 2029 revaluation”.

The Treasury estimates that around 70,000 more high street businesses will stop paying business rates as a result. Its own breakdown, based on Ministry of Housing, Communities and Local Government (MHCLG) property-level data, says an additional 3,500 pubs, 3,900 restaurants, 2,200 cafés and 1,700 hairdressers and beauty salons will pay nothing from next year. The Budget document states that, taken together with the other measures, half of all RHL properties in England will not pay business rates at all and around 110,000 RHL properties will see their bills fall next year.

Healey told MPs that the Budget was “for the working people of Britain”, as Convenience Store reported. Alongside the relief threshold, he announced a two-year real-terms freeze on rates bills for all other qualifying RHL properties, a one-year extension of transitional support for some small ratepayers, and an extra 20 percentage points of relief for pubs, social clubs and most live music venues, taking their total discount to 35%.

The four parts of the rates package

The Budget presents the rates support as one package in four parts. The table below summarises each element, the businesses it reaches and the government’s own estimate of its value.

Measure	Who benefits	Government estimate	Start date
SBRR threshold raised to £18,000 (taper to £21,000)	Qualifying RHL properties in England	About 70,000 more businesses pay no rates	1 April 2027
Real-terms freeze (CPI cap on bill increases)	All other qualifying RHL properties in England	120,000 shops avoid an extra £3,250 over two years; 14,000+ restaurants avoid £7,500	2027–28 and 2028–29
Supporting Small Business scheme extended	Ratepayers who received 2023 SSB support	About 37,000 ratepayers, average £3,000	1 April 2027, for one year
Extra 20 points of relief (35% in total)	Pubs, social clubs and most live music venues	Average of over £3,000 per pub next year	1 April 2027

The Treasury’s costings put the cost of the higher SBRR thresholds at £315 million in 2027–28 and £320 million in 2028–29. The transitional package, including the real-terms freeze, is costed at £10 million in 2027–28 and £230 million in 2028–29, and the extra pub relief at £160 million and £115 million over the same two years.

Who qualifies for the higher £18,000 threshold?

The new thresholds apply only to qualifying retail, hospitality and leisure properties in England. That is a narrower group than every small business: an office, a workshop or a warehouse with a rateable value of £15,000 will still fall under the existing SBRR thresholds of £12,000 and £15,000, because the Budget limits the uplift to RHL premises.

The usual SBRR conditions still apply. Under the existing rules, relief is generally available to a business that occupies one property, or that has additional properties each with a rateable value below £2,900. As InternetRetailing noted in its Budget review, this means the change helps single-site independents most: a retailer with a small chain of shops will still pay rates on each of its premises.

Exclusions: vape shops and gaming centres

The Budget also narrows who counts as a high street business for rates purposes. From April 2027, vape shops in England will no longer be eligible for the lower RHL multipliers or for SBRR, and Adult Gaming Centres will lose access to the RHL multipliers. Convenience Store reported that the new threshold will not apply to vape or gambling shops.

The government says this is about targeting relief “at businesses that support thriving high streets”. It sits alongside a new General Anti-Avoidance Rule for business rates in England, to be introduced after a consultation, and extra funding for councils to challenge rates avoidance in court.

Rateable value, not rent

Owners should check their rateable value rather than their rent or turnover. Rateable value is set by the Valuation Office Agency and is shown on the business rates bill and on the government’s online rates checker. Many small shops in market towns and suburban parades sit in the £12,000 to £21,000 band that this change targets, but the only reliable way to know is to look up the figure for the specific property.

How much will a typical small shop save?

The saving depends on where a property’s rateable value sits. The bill is calculated by multiplying the rateable value by a multiplier set by the government, then deducting any reliefs. Since April 2026, qualifying retail properties have paid permanently lower RHL multipliers, with the small business rate for retail reported at 38.2p in the pound for 2026–27.

Using that reported multiplier purely as an illustration, a shop with a rateable value of £15,000 currently receives no SBRR at all, because it sits at the very top of today’s taper. Its bill before any other relief would be roughly £5,730 a year. From April 2027 the same property would fall inside the new 100% band and pay nothing.

The fully relieved band: £12,000 to £18,000

Every qualifying RHL property with a rateable value between £12,001 and £18,000 moves into full relief. These are the businesses the Treasury counts in its 70,000 estimate. For a shop at £18,000, the illustrative saving at a 38.2p multiplier would be close to £6,900 a year, though actual 2027–28 multipliers have not yet been confirmed and local transitional arrangements can change the final figure.

The taper band: £18,000 to £21,000

Above £18,000, relief falls gradually and reaches zero at £21,000. The taper works on a straight line, so a property halfway through the band receives roughly half relief. Under today’s rules the same mechanism runs from £12,000 to £15,000.

Rateable value (RHL, England)	SBRR today (2026–27)	SBRR from April 2027	Change
£10,000	100%	100%	No change, already pays nothing
£13,500	About 50% (taper)	100%	Moves to zero bill
£15,000	0%	100%	Moves to zero bill
£18,000	0%	100%	Moves to zero bill
£19,500	0%	About 50% (taper)	Bill roughly halved
£21,000 and above	0%	0%	Covered by the real-terms freeze instead

Jacyn Heavens, chief executive of the till and payments provider Epos Now, told Talking Retail that “for the 70,000 businesses now taken out of paying rates altogether, this could mean thousands of pounds back each year”. Heavens added that “the priority now has to be making sure councils apply it quickly”.

What does the two-year real-terms freeze mean for bigger shops?

For qualifying RHL properties above the SBRR thresholds, the Budget promises that bill increases will be capped by CPI inflation in 2027–28 and 2028–29. The Budget document says this “does not apply to increases in rateable values resulting from improvements, or losses in other reliefs”. In practice, a shop’s bill can still rise in cash terms, but by no more than the general rate of price growth.

The Treasury frames the freeze as protection against bills that would otherwise have climbed faster. It says 120,000 shops will avoid an extra £3,250 each over the two years, and more than 14,000 restaurants will avoid an extra £7,500 each. The cap is partly funded by extending the 1p Transitional Relief Supplement for two more years, paid by properties whose bills would otherwise rise by less than the transitional caps.

Larger retailers are not persuaded. Helen Dickinson, chief executive of the British Retail Consortium, described the measure to Talking Retail as “a smoke and mirrors announcement on business rates”. The BRC says the phrase “freeze in real terms” still implies an increase of around 3.5% and adds about £250 million to retailers’ bills next April across some 500,000 medium and larger outlets. “Increasing retail’s burden means less money for investment in jobs, stores, and keeping prices down,” Dickinson said.

The BRC has long argued that retail accounts for around 5% of the economy but pays more than 20% of all business rates, and that one in seven shops now stands empty. Those figures, which the BRC repeated in its Budget reaction, frame its view that only a cut for larger stores would change pricing on the shop floor. Shop price inflation had already climbed to its highest level in two and a half years before the Budget, as our report on UK shop price inflation hitting 2.1% in October set out.

How is the rates package being paid for?

The Budget is explicit that the high street support is funded by measures that fall mostly outside the high street. There are three main sources: an extension of VAT collection rules for online marketplaces, a higher rate of Machine Games Duty and the two-year extension of the Transitional Relief Supplement.

Marketplaces will collect VAT from larger UK sellers

From October 2027, the existing VAT online marketplace liability (OMPL) rules will be extended to UK businesses. According to the Budget document, marketplaces will become responsible for collecting VAT on sales by UK VAT-registered businesses and by any other UK business with annual sales of at least £90,000 on a single platform. The rules will not apply to personal sales, second-hand goods or business-to-business transactions. We covered the pre-Budget reports of the plan in Healey’s move to make Amazon and eBay collect sellers’ VAT; the published scope confirms the £90,000 per-platform threshold and adds the exclusions.

Healey told Parliament: “I will strengthen the requirements for online marketplaces so that sellers cannot avoid paying VAT when they sell online,” Reuters reported. The Treasury says the measure tackles “non-compliance by UK sellers trading on online marketplaces that undercuts businesses on the high street who pay the tax they owe”, building on 2021 reforms that already made marketplaces collect VAT on behalf of overseas sellers.

The official costing is smaller than some pre-Budget headlines. Several outlets, citing The Times, had reported a yield of up to £1 billion, and an Amazon spokesperson had put the figure nearer £700 million. The Budget scorecard instead estimates £165 million in 2027–28, £320 million in 2028–29 and between £250 million and £270 million a year after that.

Higher duty on high-stakes gaming machines

The second funding source is gambling. Machine Games Duty will rise from 20% to 25% from April 2027, but only on machines with stakes above £1. The government says this targets “higher-risk machines” commonly found in adult gaming centres and protects pubs and seaside arcades, and that the revenue “will help to pay for the freeze in business rates for retail, hospitality and leisure”.

A future look at online retail and rates

The Budget goes a step further, saying the government “will continue to explore how the business rates system could better target online retailers in ways that minimise any indirect impacts for wider retail businesses”. That cautious wording follows reports earlier this month that a proposed levy on large out-of-town warehouses had been dropped after opposition from retail leaders, including John Lewis executive chairman Jason Tarry, who warned such a tax would “reveal a fundamental misunderstanding of how modern high streets work”.

Funding measure	Start	2027–28	2028–29	2029–30
Marketplace VAT collection for UK sellers (OMPL)	1 October 2027	+£165m	+£320m	+£270m
Low-value imports: £135 customs duty relief removed	October 2028	£0	+£215m	£0
SBRR threshold rise (cost)	1 April 2027	−£315m	−£320m	£0
Real-terms freeze and SSB extension (cost)	1 April 2027	−£10m	−£230m	£0

The low-value imports line is relevant to the same competitive argument. The Budget costings include the removal of the £135 customs duty relief on cheap imported parcels, with new customs arrangements from October 2028, a change that affects ultra-low-price platforms whose growth we tracked in our report on Temu’s UK sales jump and the end of duty relief by 2028.

How have retailers and trade bodies reacted?

The reaction split cleanly along business size. Groups representing convenience stores and independents welcomed the threshold, while the BRC, which speaks for larger chains, and several economists warned that rising wage bills and flat sales volumes would swallow much of the benefit.

Independents and convenience stores welcome the change

Ed Woodall, chief executive of the Association of Convenience Stores, called it “a major step forward in addressing the problems with the business rates system”. He told Talking Retail that “raising the rates relief threshold will mean that thousands of small shops pay no rates at all”. The ACS had told a Commons select committee earlier in the week that business rates bills across the convenience sector have risen by 79% in two years, to £356 million in 2026.

Andrew Goodacre, chief executive of the British Independent Retailers Association (Bira), said “we are pleased to see Small Business Rates Relief increased by 50%” and called it “a real win for independent retailers”. He told Convenience Store that “this Budget has not contained any of the nasty surprises from the past two years”, but said the lack of action on employment and energy costs was disappointing and that a higher Employment Allowance “would have been a real help to small employers”.

Retail brands that sell through independents were also positive. Mikkel Grene, group chief executive of Søstrene Grene, said “when one shop does well, it drives footfall and the stores around it benefit too”. Charlotte Broadbent, UK general manager of the wholesale marketplace Faire, said “every pound a shopkeeper saves on business rates is money that can now be reinvested”.

Economists and insolvency experts are more cautious

James Walton, chief economist at IGD, said business rate changes “could help eligible smaller operators”, but warned that for an industry “facing flat volumes and incredibly tight margins, these measures do not fundamentally change” the outlook. Linda Ellett, head of consumer, retail and leisure at KPMG UK, said businesses “are going to have to continue to battle for available share of wallet”.

Molly Monks, an insolvency practitioner at Parker Walsh, warned that “a lower rates bill can create breathing space, but it does not automatically turn an unprofitable business” around, and told InternetRetailing that “financial pressure does not wait for government policy to take effect”. Lucy Mangan, partner and head of tax services at Menzies LLP, said higher wage bills could erase the rates savings for small shops, adding that “business rates were built for a different era of trading”.

Joanne Thomas, general secretary of the shop workers’ union Usdaw, said “lifting the small business threshold to £18,000 is a positive move”, and credited union lobbying for the decision to raise more tax from online sellers. Chris Brook-Carter, chief executive of the Retail Trust, used the Budget to remind ministers that “we cannot overlook the crime and abuse shop workers continue to face for doing their jobs”.

What else in the Budget matters for shops and shoppers?

The rates package sits inside a broader set of measures that affect shop costs and household spending. Several of them had been trailed in the days before the speech.

The biggest cost for most retailers is pay. The National Minimum Wage and National Living Wage will rise by 3.9% next April, affecting 2.3 million of the lowest-paid workers, according to Convenience Store. We set out the new rates and what they mean for shop payrolls in our report on the National Living Wage rising to £13.20 in April 2027.

Help for households at the till

For shoppers, the Budget extends the cut to VAT on household electricity until July 2027 and funds a £100 Household Energy Payment for up to 20 million households in England from January 2027, delivered through council tax. The 5p cut in fuel duty is held until July next year. Convenience Store reported that tariffs have also been removed on more than 100 everyday products, including baked beans, garlic, gherkins, boiled sweets and plant-based drinks.

Changes for small online sellers

Small marketplace sellers get a separate boost. The Trading Allowance, the amount of trading and miscellaneous income that individuals can receive tax-free each year, triples from £1,000 to £3,000 from 6 April 2027. ChannelX, the marketplace trade site, noted that sellers should still keep records, and that once sales pass £3,000 they should claim allowable expenses on their first tax return. Eve Williams, general manager of eBay UK, said the company supports both the higher allowance and the protections for individual sellers in the VAT measure, according to ChannelX.

Further ahead, self-employed taxpayers who make payments on account will move to smaller, more regular payments from April 2029. ChannelX warned that this could draw on cash that sellers have traditionally used in August and September to buy stock for the Christmas peak. From the same month, VAT and PAYE liabilities will have to be backed by a direct debit instruction.

High Streets Strategy and derelict buildings

MHCLG also launched its High Streets Strategy on Budget day. The Budget document says it includes a “High Streets First” principle for relevant public estates, reform of Business Improvement Districts and a £210 million package to revitalise derelict high street buildings, including a £125 million Derelict Buildings Fund and £65 million to help communities rescue at-risk buildings and businesses. The Valuation Tribunal’s £150 and £300 fees for rates appeals in England will be abolished, with fees already paid on the 2026 list refunded.

Does the change apply in Scotland, Wales and Northern Ireland?

No. Business rates are devolved, and the SBRR changes announced in the Budget apply in England only. The devolved governments receive extra funding through the Barnett formula when spending rises in England, but each decides for itself whether to pass on an equivalent relief.

Nation	Current small-business relief (as reported)	Effect of today’s Budget
England	100% relief to £12,000, taper to £15,000	RHL: 100% to £18,000, taper to £21,000 from April 2027
Scotland	Small Business Bonus Scheme: 100% below £12,000, tapered support up to £20,000	Barnett funding only; Holyrood decides
Wales	Separate Welsh scheme	Barnett funding only; Senedd decides
Northern Ireland	Separate NI scheme; highest rates burden in the UK, per Retail NI	Barnett funding only; Executive decides

Trade bodies outside England moved quickly. Glyn Roberts, chief executive of Retail NI, said “Northern Ireland’s small businesses cannot afford to be left behind”, pointing to a high street vacancy rate of 25%, the highest in the UK. He urged the Executive to use the Barnett consequentials for rates relief, adding that it “now has an opportunity to use this additional funding to make a real difference”.

In Scotland, the Scottish Grocers Federation said retailers receive full relief only below a rateable value of £12,000, with tapered support through the Small Business Bonus Scheme up to £20,000 that it says has declined year on year. Its chief executive, Dr Pete Cheema, said “many Scottish retailers are already operating at a commercial disadvantage to counterparts south of the border”.

What happens next and what should shop owners do now?

The thresholds take effect from 1 April 2027, so bills issued by councils in March 2027 should reflect the new relief for eligible properties. SBRR is administered by local authorities, and many apply it automatically where they hold the right information, but others require an application. Shop owners whose rateable value sits between £12,000 and £21,000 should check their council’s process now rather than wait for the bill.

Before the Budget, independent retailers had pushed for more. Bira’s six-point submission had asked for the old 75% RHL discount to be restored and for the Employment Allowance to rise to £20,000, as we reported when Bira pressed Healey on business rates ahead of the Budget. The final package delivers on the small-shop element of that agenda but not the wider employment cost relief.

A practical checklist for April 2027

1. Look up the property’s rateable value on the government’s business rates checker and confirm it is classed as retail, hospitality or leisure.
2. Check whether the business occupies other properties, and whether each additional property is below £2,900 rateable value.
3. Contact the local council’s business rates team to confirm whether SBRR will be applied automatically from April 2027 or needs an application.
4. If the rateable value looks wrong, consider a check, challenge and appeal: from now on, Valuation Tribunal appeals in England will carry no fee.
5. Budget for the wage rise and the payments on account change separately, since rates savings may be offset elsewhere in the cost base.

Several questions remain open. The government has not yet published the 2027–28 multipliers, the detailed legislation for the marketplace VAT rules, or the design of the business rates anti-avoidance rule. The longer-term ambition, set out in the fiscal devolution roadmap, is for 100% of business rates to be retained by local councils, which would give them more say over relief in future.

Frequently asked questions

When does the new £18,000 small business rates relief threshold start?

The higher thresholds apply from 1 April 2027 for qualifying retail, hospitality and leisure properties in England. Until then, the current thresholds of £12,000 for 100% relief and £15,000 for tapered relief continue to apply.

Does my shop qualify for 100% business rates relief?

From April 2027, a qualifying RHL property in England with a rateable value of £18,000 or less should pay no business rates, provided it meets the usual SBRR conditions. Those generally require the business to occupy one property, or to have additional properties each below £2,900 rateable value. Check with your council to confirm.

What is tapered relief and how does it change?

Tapered relief gives a partial discount that falls gradually as rateable value rises. From April 2027 it will run between £18,000 and £21,000 for qualifying RHL properties, so a shop at £19,500 would get roughly half relief. Today the taper runs from £12,000 to £15,000.

Does the change help offices or warehouses?

No. The Budget limits the higher thresholds to qualifying retail, hospitality and leisure properties. Other small businesses, such as offices and workshops, stay on the existing £12,000 and £15,000 thresholds.

Are vape shops included?

No. From April 2027, vape shops in England lose eligibility for both the lower RHL multipliers and Small Business Rate Relief, and Adult Gaming Centres lose access to the RHL multipliers.

What does the real-terms freeze mean for larger shops?

For qualifying RHL properties above the SBRR thresholds, bill increases in England will be capped at CPI inflation in 2027–28 and 2028–29. Bills can still rise in cash terms, and the BRC estimates the sector still faces around £250 million of extra cost next April.

Will the marketplace VAT change affect people selling their old things on eBay or Vinted?

No. The Budget says the new marketplace VAT rules, which start in October 2027, will not apply to personal sales, second-hand goods or business-to-business transactions. They target UK VAT-registered sellers and other UK businesses selling more than £90,000 a year on one platform.

Does the relief apply in Scotland, Wales or Northern Ireland?

No. Business rates are devolved, so the change applies in England only. The devolved governments receive Barnett funding and decide whether to offer similar relief; Retail NI and the Scottish Grocers Federation have already called on them to do so.