For businesses operating in commercial and industrial properties, business rates are a significant overhead. Understanding how these rates are calculated, and how upcoming reforms may affect them, is critical for managing your bottom line. Whether you are a current tenant or considering new premises, staying informed can help you plan ahead and potentially reduce your liabilities.
The State of Business Rates in 2025
Business rates are effectively a tax on non-domestic property, levied by local authorities in England. They are based on the rateable value of the property, which reflects its estimated rental value on a specific assessment date. The amount a business pays is calculated by multiplying the rateable value by a multiplier set annually by the government.
In 2025, business rates remain a major concern for many tenants. The latest data shows that commercial properties, particularly in prime industrial and logistics locations, are seeing steady rateable values, which can translate to rising costs in areas where rental markets are strong. Small businesses often benefit from relief schemes, but for mid-size and larger tenants, rates can represent tens of thousands of pounds annually.
Some key facts for tenants in 2025:
- Rateable values are updated periodically, with the next revaluation scheduled in 2026. This can result in significant increases or decreases depending on market conditions.
- Sector-specific pressures exist, with retail and hospitality facing different valuation trends compared to industrial or warehousing properties.
- Regional variations are significant, with urban centres generally attracting higher rateable values than rural areas.
Understanding the mechanics of how rates are assessed helps tenants anticipate changes and plan financially. This knowledge is especially useful in light of ongoing reforms that could reshape the business rates landscape.
Reform Proposals: What’s in the Pipeline
The government has signalled that business rates reform is a priority, aiming to make the system fairer, more transparent, and more closely aligned with current property values. Proposed changes in 2025 include:
- More frequent revaluations: Historically, revaluations occurred every five years. Plans are underway to move to annual or biennial revaluations, reducing the lag between property market changes and rateable value updates. For tenants, this means rates could adjust more quickly to reflect current market rents.
- Relief and exemption updates: Various relief schemes exist, including Small Business Rate Relief and exemptions for certain types of properties. Future reforms may simplify eligibility and expand relief for businesses in sectors under pressure, like logistics and light industry.
- Transparency measures: The government is exploring ways to make rateable value calculations clearer. This could involve more publicly available data on comparable properties and clearer guidelines on how rental value translates into rateable value.
- Digitisation and automation: Modernising the valuation process with technology could streamline appeals and reduce disputes, benefiting tenants who feel their valuations are inaccurate.
While exact details and timelines are still under discussion, tenants should monitor announcements closely. Early engagement with landlords or professional advisers can help mitigate unexpected increases.
Rates Impact by Region and Asset Class
Business rates do not affect all properties or regions equally. Location and property type are critical factors in determining the financial impact of reforms:
- Industrial and warehouse properties: Demand for logistics space remains high, particularly in key transport hubs. While this pushes up rateable values, reforms may introduce targeted reliefs for large-scale industrial tenants.
- Retail properties: Retail continues to face pressures from online competition. Rateable values have been under review, with some reforms aiming to reduce the burden on smaller high street shops.
- Office space: Urban centres such as London, Manchester, and Birmingham continue to see high valuations, but flexible working trends could influence future rates.
- Regional differences: Northern and Midlands regions generally have lower rateable values than London and the South East. However, growth in industrial hubs in Hull, Leeds, and Sheffield means tenants should remain alert to local market trends.
Understanding these dynamics helps tenants anticipate budget requirements. For instance, an industrial tenant in Hull may face different challenges than an office tenant in central London, both in terms of current rates and potential reform impacts.
Tips for Tenants: How to Reassess Rateable Values
Even without immediate reforms, tenants can take proactive steps to manage business rates costs:
- Review your property’s rateable value: Check the valuation on the Valuation Office Agency (VOA) website. Ensure it reflects your current property usage and market conditions.
- Explore relief options: Small business relief, charitable relief, and other schemes can significantly reduce liability. Ensure you’re claiming everything you’re entitled to.
- Consider professional advice: Surveyors and business rates consultants can identify opportunities to challenge or appeal rateable values. Appeals are particularly relevant if a property has been overvalued or if market conditions have shifted since the last assessment.
- Plan for revaluations: With more frequent revaluations proposed, tenants should maintain up-to-date records of rental agreements, property modifications, and comparable market rents. This information can support future appeals.
- Stay informed on regional trends: Rates can vary significantly across regions. Monitoring local commercial property reports will help you understand whether your area is likely to see rate increases or relief opportunities.
Proactive management of business rates can directly benefit a tenant’s bottom line. Even small reductions or optimisations can translate into thousands of pounds in annual savings.
Conclusion
Business rates remain a complex but unavoidable cost for commercial and industrial tenants. As 2025 progresses, reforms promise greater transparency, more frequent updates, and targeted reliefs, but they also create uncertainty. By understanding how rates are calculated, staying aware of regional and sector-specific trends, and taking proactive steps to reassess rateable values, tenants can better manage their overheads and protect their profitability.
For businesses in Hull and across the UK, keeping informed about business rates reform is essential. Whether you are planning expansion, or simply reviewing your current property portfolio, knowledge is power—and it can save your business a substantial amount each year.
