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Methodology note

Replace some high-street business rates: calculation note

Assumptions behind the Replace some high-street business rates scenario. Implementation detail is incomplete, so uncertainty is explicit.

View main policy page: Replace some high-street business rates

Central fiscal result

+GBP 2.0bn - Net fiscal impact in 2027-28

Low case: -GBP 1.0bn. High case: +GBP 8.0bn. Positive numbers are fiscal costs or borrowing pressure. Negative numbers are Exchequer savings or receipts.

Scenario and baseline

  • High-street SMEs lose their business-rates liability.
  • Large online delivery firms face a 4% tax.
  • The model assumes council funding is reimbursed.
  • Warehousing and mixed retailers are ambiguous.

Affected population

  • Affected units are high-street premises, online firms and councils.
  • Business rates receipts are about GBP 34bn overall.
  • The eligible high-street SME subset is much smaller.
  • Consumers face possible online-delivery price rises.

Gross impact

  • Central relief cost is GBP 5bn for eligible premises.
  • Central online-tax yield is GBP 3bn after avoidance.
  • Net central pressure is GBP 2bn.
  • Low case assumes online yield nearly offsets relief.

Fiscal build-up, central case

  • High-street rates relief: +GBP 5.0bn
  • Online delivery tax yield: -GBP 3.5bn
  • Council grant administration: +GBP 0.2bn
  • Avoidance and disputes: +GBP 0.3bn

Central net impact: +GBP 2.0bn in 2027-28.

Behaviour and pass-through

  • Low case assumes broad online base and strong compliance.
  • Central case assumes online tax is partly avoided or passed through.
  • High case assumes wider eligibility and weak online yield.
  • Landlord capture reduces long-run business benefit.

Phasing

  • 2026-27: +GBP 0.5bn. Preparation or partial implementation.
  • 2027-28: +GBP 2.0bn. Main scenario year.
  • 2028-29: +GBP 2.5bn. Behaviour and pass-through develop.
  • 2029-30: +GBP 3.0bn. Steady-state uncertainty persists.

Main source groups

  • S1: Reform Contract defines relief and online tax.
  • S2: OBR business-rates receipts set total baseline.
  • S3: DBT business counts frame SME exposure.
  • S4: VAT and tax literature warn about boundary distortions.
  • S5: No official eligible-premises list was found.
  • S6: Tax-design and VAT-incidence studies inform pass-through and boundary-risk assumptions.