Relief at last? How business rate reform could help small businesses thrive
Britain’s small businesses have long called for business rate reform. The government’s upcoming Budget promises changes aimed at easing costs, supporting growth, and giving high streets a chance to thrive – but the proof will be in the detail.
In a rare pre-Budget speech, Chancellor Rachel Reeves has confirmed that the government’s 26 November Budget will prioritise growth, with long-trailed reforms to the business rates system set to play a central role.
For the small firms and high-street retailers that have, in recent years, been increasingly squeezed by rising costs, this could provide some much-needed breathing room. But, for scores of small business owners, it’s long overdue.
Reeves described the current system as a relic – “designed for a previous age, not for a digital age.” While online-only retailers can grow without the same fixed costs, high-street shops are left paying more just to keep the lights on. For many, that means tighter margins and a fight to stay open.
A system overdue for change
The Treasury’s plans aren’t entirely new. Back in September, an interim report set out ideas to fix long-standing flaws and boost investment. A key focus was tackling “cliff edges” – the rule that strips small firms of their Small Business Rates Relief as soon as they open a second site.
A local bakery, for example, could face thousands in extra rates simply for opening a second shop, turning a natural growth step into a costly gamble.
The report also took aim at another fundamental flaw: the system's crude 'slab' model, where a single tax rate is applied to a property's entire value. The government is now seriously considering a fairer 'slice' model, similar to income tax, where different bands of value are taxed at different rates. This would end the sudden, sharp bill increases businesses face when their valuation tips just over a threshold.
The September report also highlighted other measures aimed at easing the burden on small firms:
Lower tax rates: Permanently reduced tax rates for retail, hospitality, and leisure properties from April 2026, expected to be funded by a higher rate on the very largest commercial properties.
Business rates discount: A 40% discount for around 250,000 eligible businesses.
Inflation protection: A freeze in the small business multiplier to help shield firms from rising costs.
Why this matters now
This is coming at a crucial time for small businesses. Costs are rising across the board — from rent and energy bills to wages — putting extra strain on already tight margins. For independent shops, cafés, and local service providers, even small savings can make a massive difference.
While major chains can absorb costs or pivot online, independent traders rarely have that flexibility. Business-rate reform could help firms stay afloat, expand into new premises, fill vacant spaces, and hire more staff.
Some of Britain’s high streets are showing signs of revival, driven by shoppers who value community and unique local businesses. Towns like Folkestone illustrate the potential: independent cafés, boutiques, and creative spaces are transforming once-empty streets into vibrant hubs.
Reforming business rates could give entrepreneurs the space to follow Folkestone’s example.
What comes next?
Reeves has emphasised that growth is her number one mission, and these measures undoubtedly aim to give small firms the support they need to expand and thrive.
For small businesses across the country, the real test will be whether these reforms truly unlock growth – or come too late to make a difference. All eyes will be on the Budget when it lands on 26 November.
About Joe Phelan
Joe is an experienced writer, journalist and editor. He has written for the BBC, National Geographic, the Observer, Scientific American and VICE. As a business expert, his work frequently spotlights the ventures and achievements of small business owners. He writes a weekly insight article for money.co.uk, published every Tuesday.