Understanding Wales’ new business rates system

Wales has had devolved powers to set business rates since 2014. The approach the Welsh government has taken recently is different to that taken in England in several important ways.

A property’s annual business rates are therefore calculated by multiplying its ‘rateable value’ (essentially an estimation of the what one would pay to rent it, determined by the UK government body Valuation Office Agency) by a ‘multiplier’ set by Welsh Government and then applying ‘reliefs’ which are also set by government bodies.

For the 2025/26 tax year, business rates in Wales have two characteristics relevant to this discussion.

Firstly, there is a single multiplier that applies regardless of scale. Assuming no reliefs applied, all properties subject to non-domestic rates pay 0.568 times its rateable value for any given year (of which there are many complexities outside the scope of this article).

Secondly, among other reliefs, qualifying retail, hospitality or leisure businesses (RHL) are subject to a 40% reduction of this rate. This is known as RHL relief and offers a maximum total reduction of £110,000. Qualifying businesses might include farm shops, pubs, wedding venues or country houses open to the public, for example. Assuming the cap was not met and no other reliefs applied, one of these businesses would pay business rates on a multiplier of 0.3408 only.

Following a consultation which closed on the 12 August 2025, the Welsh Government has decided on several changes that will take effect from the 1 April 2026.

RHL relief, in its current form, will cease to exist. It will be replaced by a separate 0.35 multiplier only for retail properties of a rateable value under £50,000. As it is set to be a permanent relief – RHL for example was designed to be temporary following COVID – it represents a fairly generous offer for the properties that it affects, comparing favourably with England’s 0.382 small business RHL multiplier.

The disadvantage of this change is the narrowness of the new multiplier. The previous RHL relief could apply not just to retail, but many other types of business, from hotels to pony trekking centres. These businesses will lose access to this relief in its entirety.

The standard multiplier will reduce from 0.568 to 0.502. This is because a new rating list, likely increasing properties’ rateable value, will be introduced from April 2026.

As well as the standard and retail rates, there is also a new ‘higher rate’ of 0.515 for properties with a rateable value of £100,000 or more. This amount is not a particularly high value in the grand scheme of commercial property, with medium-sized hotels, stately homes, large office blocks or industrial/storage facilities potentially all falling into this category.

Note also that this is a ‘slab’ tax rather than being banded. This means the higher rate is applied to the entire rateable value of the property, not just to the element of the value which is above £100,000. Therefore, the rate payable increases somewhat sharply when a property moves above this threshold. Before other reliefs, a property rated at £99,999 would be taxed at £50,199 per annum, whereas a property rated at £100,001, would be taxed at £51,500. This is an increase of more than £1,300 per annum in tax for a difference in value of just £2.

The higher rate is not applicable to certain specific types of asset, mostly municipal examples such as hospitals, universities and leisure centres. Those most likely to be relevant to CLA members may be museums (which could perhaps apply to some members' historic attractions depending on how the word “museum” is defined) and cemeteries (in that woodland burials are an unusual but not unprecedented diversification).

This will lead to some extreme outcomes. Consider, for example a wedding venue with a rateable value of £110,000. If subject to RHL relief only, this would have been charged £37,488 in business rates for 2025/26. However, under new rules, not only would the RHL relief be lost, the property would also be moved to the higher rate, meaning before any revaluation its tax liability would eventually rise by over 51%, to £56,650. Upward revaluation is likely, so the real figure would almost certainly be higher.

Fortunately any substantial business rates rises will not take effect immediately. The Welsh Government is also providing a relief whereby any rises above £300 are stepped over three years. In 2026/27 a business with an increase of more than £300 will pay 33% of that increase; in 2027/28 they will pay 66% of the increase, then in 2028/29 they must pay the full new liability.

In the case of our £110,000 wedding venue, this means it would under this relief owe £43,811 for 2026/27, £50,134 for 2027/28 and the full £56,650 from 2028/29. While the transitional relief undeniably helps in the short term, these are still sharp increases which will threaten otherwise marginally successful businesses. Note also that this assumes no revaluation at all, which is very unlikely. In practice the increase is likely to be higher than this.

Members should be aware that there are a wide range of other reliefs which may help and could now become more important. In addition, property valuations by the government can be challenged and sometimes reduced. Therefore, you should contact CLA Cymru if your business would be harmed by these changes. Our advice may help you to reduce this harm.