Businesses across the UK are bracing for a shake-up of business rates, the tax on the occupation of commercial properties, to take effect next April. While the finer details are still being worked out—we’ll know more by the autumn—the revaluation is expected to lead to tax increases for businesses with central London offices, reflecting a rise in rents up to April 2024.

Business rates represent a significant part of a business’s tax burden: the CBI says that 14p of every £1 that companies pay in tax is through business rates. So many firms are understandably wary about the upcoming revaluation.

Whether you’re looking for a new office or worried about business rates in your current premises, it’s important to be aware of the upcoming revaluation and how it might impact your tax bill. First, it helps to understand how business rates work and how the government is tweaking the scheme in 2026.

How do business rates work?

Business rates are calculated according to this formula:

Business rates = Rateable Value (RV) x Multiplier

The Rateable Value of a property is the estimated annual rent that the property would achieve, determined by the Valuation Office Agency (VOA). RVs are updated every three years and reflect a property’s rental value as of a set date. For the rates to take effect on 1 April 2026, that date is 1 April 2024.

The multiplier is a pence-per-pound figure set by the government and adjusted annually for inflation. Currently, there are two multipliers, one for small businesses and then a higher multiplier for larger firms.

For the 2025-26, those multipliers are:

• Small businesses (properties with RVs below £51,000): 49.9p
• Higher multipliers (properties with RVs of £51,000 and above): 55.5p

Additionally, the City of London, home of the capital’s most coveted offices, sets its own slightly higher multipliers. These higher multipliers raise money for its police force and other local services, as it has few residents paying council tax.

Changes set

Business rates will be shaken up as scheduled on 1 April 2026, based on up-to-date valuations from the VOA and with adjusted multipliers. Additionally, the government is also tweaking how business rates are calculated for some properties, which could have major implications for the tax bills of some businesses.

Starting in April, there will be five multipliers, with two of them offering discounts for Retail, Hospitality and Leisure (RHL) properties with RVs below £500,000. These discounted multipliers make permanent the relief offered to retail, hospitality, and leisure businesses following the pandemic.

However, there was a discount reduction effective from April 2025, from 75% to 40%, pushing up business rates for retail/hospitality occupiers by 140%.

These discounted categories will be funded by a higher multiplier on all commercial properties with RVs of £500,000 and above.

How will the business rate revaluation affect businesses with London offices?

1. Rents are higher now, so RVs will be higher

The previous business rates were based on rental values on 1 April 2021, when the commercial property market was still being rocked by the Covid-19 pandemic and many people were predicting that our business districts might be forever deserted, with work patterns permanently shifted. For many companies, the drop in rental values between 2017 (the date of the previous valuation) and 2021 meant lower business rates over the last three years.

Four years on, those 2021 obituaries for the office look very premature. Return to office (RTO) policies are bringing workers back into commercial districts, and a shortage of high-quality, modern spaces is driving fierce competition for offices, pushing rents past their pre-pandemic levels in many areas. Between 2021 and 2024, prime rents in the City rose by more than 10%, while West End rents climbed by more than 20%.

Those rises mean RVs for office buildings in most London locations will increase in April, driving up business rates. Even if firms locked in lower rents back in 2021, they’ll still see a hike in their business rates due to market trends: RVs are based on the rent the property could fetch on the open market rather than the rent currently being paid.

The VOA will publish draft RVs later this year, to give tenants and owners some notice, before confirming the final valuations on 1 April 2026.

2. Higher multipliers for large, expensive properties

The government says that the higher multiplier for properties with rateable values over £500,000 is designed to target the distribution warehouses of online retail giants and to level the playing field between these companies and high-street shops. Fewer than 1% of commercial premises in the country have RVs over £500,000. However, these include large or expensive offices in Central London. With prime rents in the City pushing £100 last year, an office doesn't have to be huge to cross that £500,000 threshold.

Multipliers for 2026-27 will be announced in the Autumn Budget. It’s unknown how much higher the multiplier for these premises with high rateable values, but it could be up to 10p higher, which would represent a 20% premium.

How are you preparing for the business rates revaluation? Are you factoring these potential increases into your property strategy, or waiting to see the draft valuations first?

‍