On 1 April 2026, all commercial properties across the UK will be reassessed for business rates. With significant geographical and sectoral variation in rental growth seen since the last revaluation in 2023, what’s in store for occupiers the length and breadth of the UK?
The next revaluation will be the first since the government moved to three yearly revaluations, with the new 2026 rateable values in England and Wales based on rental values as at 1 April 2024. As current rateable values are based on a valuation date of 1 April 2021, how the 2026 revaluation will impact ratepayers depends on how rental values have moved between these two valuation dates.
INDUSTRIAL SET FOR BIG INCREASE
Data from MSCI’s quarterly index suggests that across the UK rental values for all commercial properties increased by an average of 10.7% between April 2021 and April 2024. However, there are notable contrasts between sectors. The same data suggests average retail rental values have fallen by 0.5% over the period while offices rental values have increased by 6.0%. However, the sharpest movement has been seen in the industrial and logistics sector, where values have increased by a substantial 28.6% reflecting continued strong demand for industrial premises between April 2021 and April 2024.
Assuming 2026 rateable values follow these movements in rental values, occupiers of industrial properties are set to experience significant increases in rates liabilities from next April. Concurrently, the impact on retail and office occupiers will be less significant, with many occupiers in these sectors set to experience reduced liabilities next year.
SIGNIFICANT VARIATION BETWEEN LOCATIONS
Although the movement in rental values across sectors provides an insight into what the overall impact of the rating revaluation might be, the actual level of rental movement varies greatly between locations and individual properties. The below heat maps reveal how rental value movements have varied across key cities and UK regions for each of the three sectors. While most locations broadly follow the national position, some are markedly different. This is especially notable for London industrials, where average rental values have increased by over 40% over the period.
CLARITY TO APPEAR IN Q4 2025
While the maps provide an indicative guide on the direction of travel, a much clearer picture of how the 2026 revaluation will impact properties across the country will emerge in Q4 2025, when the Valuation Office Agency is due to publish the draft 2026 rateable values. . The Government is also set to announce the 2026/27 multipliers which will be applied to the new 2026 rateable values to calculate the annual rate liability for that year. This will include the new reduced multiplier for retail,hospitality and leisure properties and the increased multiplier for properties with a rateable value above £500,000.
There is plenty in store for ratepayers next April with most retailers set to benefit from both the revaluation and the new reduced multiplier for that sector. Conversely, significant increases in liability are likely for occupiers of larger industrial properties, particularly those located in and around London. Office occupiers should feel less of an impact, albeit those in buildings with rateable values above the £500,000 threshold for the higher multiplier are also likely to see above average increases.
SCOTLAND IS DIFFERENT
Given the smaller number of properties to be valued in Scotland, here it possible to have a valuation date just one year before a new Valuation List come into effect. As such current rateable values are based on 1 April 2022 rental values and from April next year they will be based on 1 April 2025 rental values. MSCI data suggests a broadly similar pattern to rental value movements in England and Wales between April 2021 and April 2024, although as can be seen from the heat maps this movement is not totally aligned.
If you are concerned about or have any questions relating to the forthcoming revaluation, please contact us for more detailed advice.
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