Business rates punish companies 'simply for existing' - the time for tinkering is over

I am often asked one simple question: why do business rates provoke so much anger among independent retailers?

The answer is equally simple. Because they are probably the most unfair tax in Britain.

I have been involved with the British Independent Retailers Association since 2018, and throughout that time business rates have consistently been one of our top three policy priorities. Other crises have come and gone. We battled through Brexit. We survived Covid. We have wrestled with soaring inflation, rising wage costs and endless regulation.

But business rates have remained the constant headache because they penalise businesses simply for existing.

Think about it. If your business makes no profit, you still pay business rates. Unlike corporation tax, there is no relationship between what you earn and what you owe. 

If you employ nobody, you still pay business rates. Unlike employers' National Insurance, there is no recognition of the jobs you create. Even if you own your premises outright and pay no rent, the taxman still demands his share.

Most perversely of all, if you invest in your shop to improve it, expand it or make it more attractive for customers, your business rates can actually increase before those improvements have generated a penny of extra income.

How can any Government claim to champion growth while operating a tax that punishes investment?

Independent retailers have endured this unfairness while adapting to the biggest transformation the retail sector has ever experienced. Online shopping now accounts for around 35 per cent of retail sales, fundamentally changing consumer behaviour.

Despite these enormous structural changes, and the rise of big retail parks, independent retailers have refused to give up. They have reinvented themselves, embraced technology, diversified their offer and continued serving their communities with the personal service that no algorithm can replace.

But resilience alone is no longer enough.

We have reached a critical point where independent retailers need genuine support rather than warm words.

Successive governments have all insisted they 'understand' the problem with business rates. Rachel Reeves even claimed she had 'transformed' the system through reforms announced in the 2025 Autumn Budget. The promise was simple: permanently lower rates for retail, hospitality and leisure businesses, funded by a higher multiplier for larger properties.

The reality tells a very different story. Many independent retailers are facing significant increases in their own bills over the coming years as revaluations and changes take effect. Instead of the permanent support they were promised, many small businesses will be paying substantially more.

That is not transformation.

It is a system that continues to punish the very businesses ministers claim they want to protect.

This is precisely why BIRA is backing the hybrid business rate solution developed by the Real Rates Reform Alliance, a broad coalition of business organisations, including Heart of London Business Alliance and UKHospitality.

It starts from one undeniable fact: the economy has changed beyond recognition since business rates were introduced in 1990, but the tax system has failed to keep pace.

Today, property-heavy businesses shoulder most of the burden, while many online operators generate billions in sales from relatively modest property footprints. That imbalance is no longer sustainable.

The new alliance's proposal is both practical and fair. It would reduce business rates on physical premises by around 37 per cent, returning the multiplier to its original 1990 level, while introducing a modest two per cent levy on eligible online sales, collected through the existing VAT system. The result would be a broader, fairer tax base that actually reflects the modern economy and is estimated to raise more revenue overall for the Treasury.

This is not about punishing online retail. Britain's economy needs successful digital businesses just as much as it needs thriving town centres.

It is about creating a level playing field.

Independent retailers are not asking for special treatment. They simply want a tax system that recognises the value they bring. They invest in our communities, employ local people, support local suppliers and keep our town and city centres alive. Yet they continue to bear a disproportionate share of a property tax designed for a pre-digital age.

Andy Burnham is promising 'growth in every postcode'. Delivering that will mean revitalising our high streets and backing small businesses, and not continuing to apply sticking plasters to a broken system.

The time for tinkering has passed.

Britain needs real business rates reform.

And the hybrid business rate offers the fairest, most credible place to start.

>> Andrew Goodacre was writing for business publication This is Money.