Business Rates in 2026 – What Welsh Directors Need to Know Right Now

Gareth Jones - Founder & CEO, TownSq

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2026 sees significant changes to business rates rules that could lead to unexpected bills and disruption for many Welsh businesses.

What are Business Rates?

Business rates, often known as NNDR, or National Non-Domestic Rates, are taxes on commercial properties, set by the Valuation Office Agency (VOA) based on how space is used, rent paid, location, and property layout. The rateable value is subject to a multiplier that determines your actual bill – which is usually just over half the rateable value.

Revenue is collected by local authorities, pooled nationally, then redistributed nationally to each of Wales’ 22 councils based on population, and to the police and crime commissioners – though these are due to be abolished in 2028.

This generates around £1bn per year for services like education, highways, libraries, and social services, or wherever they choose.

The VOA is merging back into HMRC in April as part of government efficiency measures, so expect these letters to come from HMRC going forward.

What’s Changing in 2026?

Draft valuations for 2026-2029 were released in November 2025, so you can see right away how much your rateable value is changing by searching. Check your postcode on the VOA website to see how your rateable value is changing, and appeal if you disagree.

Welsh Government is subsidising the transition with £116m covering two-thirds of your increase in 2026-2027, and one-third in 2027-2028.

The Small Business Rates Relief (SBRR) scheme continue at £137m per year, providing tapered relief for micro businesses and sole traders.

The significant change in 2026 is a two-tier multiplier system. Small retail outlets (under £51,000 rateable value) get a reduced multiplier of 0.350, while larger shops face 0.515. Around 13,000 retail properties will benefit, saving £20m collectively.

But here’s the critical detail: only actual shops qualify for this lower rate. That’s it.

If you run a cafe, restaurant, pub, gym, or salon – any business selling services rather than goods, you don’t qualify. Around 13,000 retail properties will benefit from the local multiplier, saving around £20m collectively, but hospitality. Hospitality and leisure get nothing.

The Hidden Tax Shock

Since 2020, Welsh Government has provided business rates relief for retail, leisure and hospitality, capped at £110,000 per business. Worth £1bn over the last six years, that relief ends on 31st March 2026.

The timing is brutal. Just as revaluation hits – with many businesses facing increased rateable values – the 40% discount disappears overnight. Add in Living Wage and NI increases disproportionately affecting hospitality, and it looks even worse.

A cafe with £15,000 rateable value currently pays around £5,100 annually after 40% relief. From April 1st, with the standard multiplier of 0.502 and only transitional support, that jumps to £6,650.

Whether you’re in Cardiff Bay, Caerphilly, or Caernarfon, everyone loses the 40% relief and faces the standard multiplier. No exceptions.

Meanwhile, a bookshop or independent shop would pay around £5,250 under the new retail multiplier.

This is a deliberate policy decision to help traditional retail compete with online shopping, while leaving hospitality and leisure to absorb the full removal of temporary relief.

Whether this is the right call depends on your perspective. Retail faces existential threat from e-commerce, but hospitality and leisure’s existential challenges are slightly more woolly – if no less threatening. They’re the businesses that bring life and footfall to our town centres, making this a risky decision.

Small Businesses in Shared Workspaces

One other worrying development is how small businesses in shared workspaces will be billed from 2026 onwards – effectively introducing a stealth tax.

In late 2024, there was a novel court case, Prosser v Ricketts, considering how barristers’ chambers are treated for rates. The Upper Tribunal ruled that barristers’ chambers should be valued as a collective unit rather than individual rooms due to their shared services. This precedent is now being applied to serviced offices, coworking spaces, and other shared workspace models.

Previously, shared workspaces were assessed as individual units, rather than as a single building. This usually keeps the small business tenant’s rateable value low enough to qualify for SBRR. Now the VOA is increasingly valuing all firms in shared workspaces as one pushing the rateable value too high for relief.

As an example: a building with 20 tenants could see each unit valued at £11,500 rateable value, under the £12,000 SBRR threshold meaning £0 business rates.

Under the new approach, the entire building is valued at £230,000, so no business qualifies for SBRR. Each small business would go from paying £0 to around £5,750 per year.

Up to 150,000 businesses in serviced offices, food halls, indoor markets, and pop-up spaces could be affected. This will also slow investment into flexible workspace, access to which regularly cited as a barrier to growth.

With 94.7% of Welsh businesses having under ten people, this is a significant problem.

What You Need to Do Now

If you’re in hospitality, leisure, or services currently receiving the 40% relief, budget for a significant rates increase from April. Transitional relief will soften it over two years, but losing the relief while rates increase will sting.

Check your draft valuation on the VOA website before 31st March. If you disagree, appeal.

If these policies seem wrong make your voice heard. The Federation of Small Businesses Wales has already called for this, but Welsh Government needs to hear from affected businesses – especially with elections this year.

For small retail businesses, this should be an advantage. While I doubt it will spark an immediate high street revival, it removes a significant barrier, and encourages the unlocking of underutilised high street assets – something it feels like we’re all agreed is a national priority.

But be honest about the trade-offs. The £20m saving for small shops is offset by higher rates on larger properties – and by the removal of £78m in temporary relief from businesses that arguably need it just as much.

These changes could significantly impact your bottom line in a year of increased complexity and tax costs. Take action before 31st March to protect your business and hit the new financial year with positive momentum.