Reeves looking at easing taxes for small businesses

Small businesses will find it easier to expand and employ more people as a result of the government’s move to make business rates fairer.

HM Treasury published a report on Thursday (11 September) setting out how Chancellor Rachel Reeves will explore fixing sudden jumps in business rates – known as ‘cliff edges’ – that can discourage small business investment and growth.

Currently when a business opens a second property, they lose access to all Small Business Rates Relief (SBRR), holding businesses back from expanding.

That means that a local bakery would have to pay thousands of pounds more to open a small shop in the next village.

The report confirms that the government will review how SBRR can support business growth, potentially lifting growth and living standards in the future for those who work in these small businesses.

The report comes as Reeves sets out her intentions to go further on legislation to cut red tape and deregulation to drive growth.

This week, the Chancellor issued a letter to cabinet ministers stressing the importance of the government taking action to reduce inflation and reduce the cost of living, keeping a tight control of public spending through the non-negotiable fiscal rules, and going further in kickstarting economic growth for all parts of the country.

Changes incoming

As announced at Autumn Budget 2024, from April 2026, there will be permanently lower tax rates for retail, hospitality, and leisure properties – including shops, pubs, and restaurants. Full details will be announced at the Budget on 26 November 2025.

In the meantime, the government said it is already helping small businesses by:

Giving 250,000 retail, hospitality, and leisure businesses, including shops, pubs, and restaurants, 40% off their business rates.
Freeze the small business multiplier to protect against inflation.

The government will also consider other ways to improve support for businesses that invest in their premises, and to make the business rates system easier to engage with, especially following the merger of the Valuation Office Agency with HMRC.

Options being considered are changing the way the tax is calculated to minimise cliff-edges and enhancing Improvement Relief. The government will provide a further update at the Budget.

The government said it will be conducting further engagement with stakeholders about these options to improve the system.

“Our economy isn’t broken, but it does feel stuck. That’s why growth is our number one mission. We want to see thriving high streets and small businesses investing in their future, not held back by outdated rules or strangled by red tape,” said Reeves.

“Tax reforms such as tackling cliff-edges in business rates and making reliefs fairer are vital to driving growth. We want to help small businesses expand to new premises and build an economy that works for, and rewards working people.”