What does the pledge mean?

Business rates are a system of property taxes on most non-domestic properties, such as shops, pubs and offices. The basic rate is determined by:

• A property’s rateable value: an estimate by the Valuation Office Agency of how much it would have cost to rent a property for a year on 1 April 2021.
  
  
• The multiplier: a property’s rateable value is then multiplied by a ratio, expressed in pence per pound of rateable value. There are currently two multipliers. Businesses with a rateable value of £51,000 a year or more pay the standard multiplier of 54.6p in the pound, while those rated under £51,000, which are deemed small businesses, pay 49.9p in the pound. This means, for instance, a shop that has a rateable value of £10,000 would be liable for a basic annual rate of £4,990 (£10,000 multiplied by the small business multiplier of 49.9p in the pound).

However, there are various types of relief from the tax, depending on the function of the business and its size, while some establishments—such as agricultural buildings and places of worship—are exempt.

Business rates are collected by local authorities, around half of which they keep to fund local services, and the other half goes towards central government. Business rates are devolved in Scotland, Wales and Northern Ireland.

Labour’s manifesto did not say what specific changes would be made to make business rates “fairer”, although prior to the election it said any replacement would “reduce the burden on high streets”, by creating a system that is “fairer for bricks and mortar businesses”.

It has also committed to ensuring any replacement system can raise “the same revenue” as the current system. Local authorities in England have estimated business rates will bring £27.8 billion in 2025/26, according to the latest data.

What progress has been made?

We are currently rating this pledge as “wait and see”.

While the government has announced its intention to make some changes to business rates from 2026/27, we don’t expect confirmation of this or possible further details on any replacement until the 2025 Autumn Budget at the earliest.

In the 2024 Autumn Budget, chancellor Rachel Reeves announced the government’s intention to introduce “two permanently lower tax rates for retail, hospitality and leisure properties”, with a higher multiplier for the “most valuable properties” from 2026/27. Ms Reeves also announced a 40% relief for these businesses up to a value of £110,000 in 2025/26, as well as a freeze to the small business multiplier for that tax year.

In April 2025, the government passed legislation which gave it the power to set two new lower multipliers for retail, hospitality and leisure businesses, as well as a new, higher multiplier for businesses with a rateable value of £500,000 and above from 2026/27 onwards.

While these powers now exist in legislation, the government said in September 2025 the exact rate of tax incurred under each multiplier will be confirmed in the Autumn Budget 2025, taking into account the “economic and fiscal context”.

Alongside these reforms, the government began discussions with business leaders and other stakeholders on “how the government can best deliver this transformed system” over the course of the parliament.

In an interim report in September 2025, the government said it was exploring the case for further changes. These included moving to a “slice” approach to business rates—a marginal tax rate system, where successive bands are taxed at increasing rates—and strengthening small business relief.

A press release said this report provided a “blueprint to reform business rates to incentivise investment”.

However, these changes are not confirmed, with the chancellor expected to give a further update in the Budget.

When we asked the Treasury whether it considers these changes, or any potential changes in the Budget as a “replacement” of business rates, a spokesperson said it was “creating a fairer business rates system”, pointing to the new tax rates mentioned above.

The spokesperson added: “Unlike the current relief for these properties, there will be no cash cap on the new lower tax rates, and we have set out our long-term plans to address ‘cliff edges’ in the system to support small businesses to expand."