Compliance

Preparing for the 2026 Reset of the Business Rates Retention System: What Small Businesses & Local Authorities Need to Know

England will see a full reset of the Business Rates Retention System in 2026-27, affecting local authority funding and small business tax bills, especially under the new permanent multipliers for retail, hospitality & leisure properties.

By NomadicTax Research Team • 5-8 min read • November 24, 2025

## What’s Changing & When - The **Business Rates Retention System (BRRS)** will be **reset** from **1 April 2026**. The reset means updating how much business rates income each local authority is expected to collect. ([gov.uk](https://www.gov.uk/government/consultations/local-authority-funding-reform-resetting-the-business-rates-retention-system/outcome/resetting-the-business-rates-retention-system-technical-consultation-summary-of-responses-and-government-response?utm_source=openai)) - Alongside the reset is a **property revaluation in 2026** which updates rateable values (RVs), affecting bills. ([gov.uk](https://www.gov.uk/government/consultations/local-authority-funding-reform-resetting-the-business-rates-retention-system/local-authority-funding-reform-resetting-the-business-rates-retention-system-technical-consultation?utm_source=openai)) - Introduction of **permanently lower multipliers** for Retail, Hospitality & Leisure (RHL) properties with RVs under £500,000. Higher multipliers for properties above that threshold. ([gov.uk](https://www.gov.uk/government/consultations/local-authority-funding-reform-resetting-the-business-rates-retention-system/local-authority-funding-reform-resetting-the-business-rates-retention-system-technical-consultation?utm_source=openai)) ## Impact on Small Businesses - **Tax bills may fall** for qualifying RHL businesses under £500,000 RV due to lower multipliers. Comforting for pubs, restaurants, shops. ([gov.uk](https://www.gov.uk/government/consultations/local-authority-funding-reform-resetting-the-business-rates-retention-system/local-authority-funding-reform-resetting-the-business-rates-retention-system-technical-consultation?utm_source=openai)) - But bills could **increase** or shift where local authorities lose income; those authorities may raise other rates or reduce services. Businesses in different areas might see large geographic variations. ([gov.uk](https://www.gov.uk/government/consultations/local-authority-funding-reform-resetting-the-business-rates-retention-system/outcome/resetting-the-business-rates-retention-system-technical-consultation-summary-of-responses-and-government-response?utm_source=openai)) - Small Business Rate Relief, etc., will continue, but the structure of relief and multipliers will affect total liability. Planning for 2026-27 must account for both revaluation and multiplier structure. ([gov.uk](https://www.gov.uk/government/consultations/local-authority-funding-reform-resetting-the-business-rates-retention-system/local-authority-funding-reform-resetting-the-business-rates-retention-system-technical-consultation?utm_source=openai)) ## Implications for Local Authorities - New baseline figures (BRBs) will be recalculated, and associated top-ups or tariffs adjusted per authority. ([gov.uk](https://www.gov.uk/government/consultations/local-authority-funding-reform-resetting-the-business-rates-retention-system/local-authority-funding-reform-resetting-the-business-rates-retention-system-technical-consultation?utm_source=openai)) - Authorities will receive **Section 31** compensation from central government for loss in revenue when reliefs or lower multipliers reduce their income. ([gov.uk](https://www.gov.uk/government/consultations/local-authority-funding-reform-resetting-the-business-rates-retention-system/outcome/resetting-the-business-rates-retention-system-technical-consultation-summary-of-responses-and-government-response?utm_source=openai)) - Some authorities may face sudden shifts in funding depending on RV changes and property mix. Must prepare transition funds and communication strategies for ratepayers. ([gov.uk](https://www.gov.uk/government/consultations/local-authority-funding-reform-resetting-the-business-rates-retention-system/local-authority-funding-reform-resetting-the-business-rates-retention-system-technical-consultation?utm_source=openai)) ## Planning & Actionable Steps - **Review your property’s rateable value**: Check estimated RV under next valuation; see if your RHL status (< £500,000) applies so you qualify for favourable multiplier. If over, plan for higher rates. - **Budget forward to 2026-27**: Include potential increases, not just for rates but secondary impacts (e.g. services, fees). - **Leverage reliefs**: Use Improvement Reliefs or local incentives wherever possible to reduce tax burden. Monitor where small business relief applies. ([gov.uk](https://www.gov.uk/government/consultations/local-authority-funding-reform-resetting-the-business-rates-retention-system/local-authority-funding-reform-resetting-the-business-rates-retention-system-technical-consultation?utm_source=openai)) - **Monitor Local Authority communications**: Authorities will publish proposed BRBs, tariffs, and supplements well in advance. Engage in consultations if available. ## Example Scenario > A small café in a high street with RV £200,000 currently paying under regular multiplier might benefit from a lower RHL multiplier from 2026-27. If the standard multiplier is 55.5p and RHL multiplier drops to, say, 45p, this could mean ~19% savings on rates, but offset by possible increases due to RV revaluation. ## Key Takeaways - The reset and multiplier reforms are **high‐impact** for RHL businesses and local authorities. Medium for non-RHL. - Early planning (12-18 months ahead) can make a big difference. - Stay informed via government consultations and draft local authority settlements. - Advice from tax professionals valuable for forecasts and entity considerations.