Business rates hike: who’s paying what and why 340,000 firms could shut

The long-awaited overhaul of business rates will finally take effect from Wednesday, 1st of April. Many high street businesses could be facing significantly higher bills, as new data paints a bleak picture for smaller firms.

A survey from the Federation of Small Businesses (FSB) warns that over a million businesses will potentially have to cut jobs to manage the increased business rates bills. 248,000 will attempt to sell or pass on their business, while 340,000 could close entirely. 

The recent changes to business rates aim to support businesses by introducing a lower multiplier. But changes to rateable values and the removal of pandemic-era relief mean that many businesses are inevitably going to face higher bills.

What’s changing from April 1st?

In the Autumn Budget, Chancellor Rachel Reeves announced that the business rates system would be getting a welcome makeover. The changes come into force on the 1st of April.

This means that businesses’ rate bills will reflect current rateable values, replacing the previous valuation carried out in 2023, which was based on the estimated cost in 2021, when rents were skewed following the pandemic.

There’s also a new, more complex system of multipliers. The current system uses just two multipliers based on a property’s rateable value: the small business multiplier for businesses with a rateable value (RV) below £51,000, and a standard multiplier for those over that amount. 

From this Wednesday, the system will work with five multipliers, reflecting both business type and property value.

Key Changes to Multipliers from April 2026

On paper, it looks like small businesses are landing a better deal, but the timing also coincides with the end of key support measures that helped businesses survive the pandemic. 

Most notably, retail, hospitality and leisure firms are losing their 40% relief. That means many businesses may face an overnight increase in their fixed costs.

At the same time, the Treasury is predicted to pocket £35.8bn over the next year, an £8bn increase driven in part by the revaluation, which has understandably caused outrage.

Sir Mel Stride, the shadow chancellor, commented: “Keir Starmer’s Labour promised to scrap business rates – instead they’re cashing in on them.

“Billions ripped from businesses, while pubs face huge tax hikes, is nothing short of a hammer blow to our high streets. Starmer and Reeves are completely tone deaf to the damage they’re causing.”

Who is exempt — and what relief is available?

The government says around one in three properties will continue to pay no business rates, largely due to existing relief schemes aimed at smaller firms or charities.

However, for many retail, hospitality and leisure (RHL) businesses, support is being scaled back. The Covid-era 40% discount has now ended, meaning businesses will face higher bills. But there are some temporary protections to soften the increase. 

Transitional relief is the main method of limiting sudden cost jumps. It caps how much a business rates bill can rise (or fall) each year following revaluation, with changes phased in gradually. Eligible businesses will have this applied automatically.

From April 2026, increases are capped as follows:

• Rateable value up to £20,000 (£28,000 in London) – 5% (2026–27), then 10% and 25% plus inflation
• £20,001 to £100,000 –  15% (2026–27), then 25% and 40% plus inflation
• Over £100,000 –  30% (2026–27), then 25% increases in subsequent years

This system will be partly funded by a temporary 1p increase to the multiplier for businesses not receiving relief.

Additional targeted support is also available:

• Supporting Small Business (SSB26) scheme – Caps bill increases for firms losing small business or retail, hospitality and leisure relief at the higher of £800 or the relevant transitional cap. This scheme has been extended and broadened from April 2026.
• Small Business Rates Relief (SBRR) grace period – Businesses expanding to a second property will now retain relief on their first property for three years, instead of just one.
• Pubs and live music venues relief – Eligible venues will receive an additional 15% discount on business rates from 2026/27, following pressure from pub landlords and trade bodies. 

Despite these measures, UKHospitality estimated that the average pub will pay an extra £12,900 over the next three years, while a typical hotel could face increases of more than £200,000, highlighting the reality of the cost increases even with relief available.