Replace some high-street business rates

Rates baseline

Reform's 2024 Contract proposed abolishing business rates for high-street SMEs, funded by a 4% online delivery tax. Business rates receipts are about GBP 34bn overall.

• Business rates receipts are about GBP 34bn.
• Only high-street SMEs are modelled as exempt.
• Online tax base is weakly specified.

Core trade-offs

Physical high-street businesses gain lower fixed costs. Online retailers and delivery users face higher costs, while the Exchequer depends on a new, uncertain tax base.

• High-street SMEs gain fixed-cost relief.
• Online customers and firms bear costs.
• New tax base may be avoidable.

Illustrative fiscal impact

-GBP 1.0bn to +GBP 8.0bn. Central estimate: +GBP 2.0bn.

• Positive numbers mean public-finance pressure; negative numbers mean Exchequer savings.
• GBP 34bn rates is the main scale marker.
• Gross costs and receipt offsets are separated in methodology.
• Behaviour and pass-through widen the range.
• This is not an official costing.

Economic impact by 2027-28

• Jobs: May support high-street jobs, but online retail and logistics hiring could weaken.
• Wages: No direct wage effect; owners and landlords may capture relief.
• Prices: High-street prices may fall; online delivery prices likely rise.
• GDP / productivity: Could protect lower-productivity retail space and tax more efficient distribution.

Assessment

The policy targets a real fixed-cost problem for high-street firms, but replacing property taxation with an online delivery tax is not automatically efficient. Relief may be captured by landlords, and the online tax could raise consumer prices while penalising more productive distribution models.

Confidence: Low. Rates receipts are clear, but high-street eligibility and online-tax design are too vague for a narrow range.

Main risks

• Landlord capture: Business-rate relief may feed into higher rents after leases reset.
• Online pass-through: Delivery taxes are likely passed to consumers or suppliers.
• Local funding: Councils need replacement funding if business-rate revenue falls.

Safeguards

• Define high-street SME eligibility precisely.
• Publish online-tax base and avoidance rules.
• Protect council funding through transparent grants.

Academic evidence

UK government evidence

Sources

• PolicyLens illustrative scenario methodology: Replace some high-street business rates Internal - PolicyLens, 2026
• Corporate income tax reforms and international tax competition Academic article - Devereux, Griffith and Klemm, Economic Policy, 2002
• Business population estimates 2025 Official statistics - Department for Business and Trade, 2025
• Economic and fiscal outlook: business rates receipts Fiscal forecast - Office for Budget Responsibility, 2026
• Our Contract with You Party policy document - Reform UK, 2024
• What Goes Up May Not Come Down: Asymmetric Incidence of Value-Added Taxes Academic article - Benzarti, Carloni, Harju and Kosonen, Journal of Political Economy, 2020
• Tax by Design: The Mirrlees Review Academic review - Mirrlees and review team, IFS and Oxford University Press, 2011
• Our Policies Party policy source - Reform UK, 2026

Other Reform UK policies

• Raise income-tax thresholds
• Cut household energy taxes
• Cut fuel duty by 20p
• Cut stamp duty below GBP 750,000
• Raise inheritance-tax threshold to GBP 2m
• Cut corporation tax to 15%
• Raise VAT threshold to GBP 150,000
• Abolish IR35 rules