The UK government has signalled a review of the business rates system, aiming to address abrupt “cliff edges” that penalise small firms when they expand — a long‑standing concern among businesses and sector bodies that current rules discourage investment and growth. Under the existing framework, many small companies instantly lose valuable reliefs once they open a second site or exceed certain thresholds, leading to sharp jumps in property tax liabilities that can disincentivise scaling up operations.
An interim government report published in September 2025 outlined how the Treasury is examining several aspects of business rates, including how Small Business Rates Relief (SBRR) and Improvement Relief function and how the system’s structure could be reformed to be fairer and more growth‑friendly. Officials have indicated that proposals to smooth the transitions between relief bands and possibly adopt a more gradual, banded or “slice‑based” approach to calculating rates are being considered ahead of the 26 November Budget.
Business groups have welcomed the review, arguing that sudden increases in rates — particularly when a small business grows into a second property or undertakes investment — can reduce incentives to expand and create jobs. Some logistic and property stakeholders have also urged the government to ensure that any reforms support investment in industrial and warehousing assets, including by extending relief for sustainable upgrades and longer‑term certainty in rate setting.
The government says it will continue stakeholder engagement — especially with small and medium‑sized businesses — to gather evidence on how the current system affects investment decisions and to shape reforms that could stimulate economic growth while maintaining a stable revenue base for local services funded by business rates.
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