Budget 2026 and the high street: rates relief, the Derelict Buildings Fund and online VAT for Nottingham shops

Budget 2026 contains the most direct package for the high street in several years: deeper business rates relief for shops, pubs and cafés, a new fund for derelict buildings, and a plan to make online marketplaces collect VAT on UK sellers, with the money going back into high street rates. For an independent retailer in Nottingham, or a business owner thinking about buying a shop, café or salon rather than renting one, this piece explains what each measure does, when it starts, and how it could affect the numbers a lender looks at.

Retail rates relief: the change that reaches most shops

The biggest practical measure is a change to Small Business Rates Relief for retail, hospitality and leisure (RHL) properties in England. From 1 April 2027, "The threshold for 100% relief will increase to a rateable value of £18,000, and the threshold for tapered relief will increase to a rateable value of £21,000" (Budget 2026, para 6.190). The previous thresholds were £12,000 and £15,000.

The Treasury says this takes "around 70,000 more high street businesses out of business rates", including an additional 3,500 pubs, 3,900 restaurants, 2,200 cafés and 1,700 hairdressers and beauty salons (para 3.22). It also expects that "half of all RHL properties in England will not pay business rates at all" (para 3.23).

Two points to check before you count the saving:

• It applies to qualifying RHL properties only. The higher thresholds do not extend to offices or industrial units (para 6.190). A shop in Hockley or a café near the Lace Market may qualify; a first-floor office above it does not benefit from this change.
• Small Business Rates Relief has its own conditions. It generally depends on the business occupying the property and, in most cases, not having other properties above certain limits. Ask your billing authority or a rating adviser before relying on it.

For RHL properties above the relief thresholds, there is a two-year real-terms freeze: "business rates bill increases for qualifying RHL properties in England are capped by CPI inflation in 2027-28 and 2028-29" (para 6.191). The cap does not cover increases in rateable value from improvements to the property, or the loss of other reliefs. The Treasury estimates that 120,000 shops will avoid an average extra £3,250 over the two years (para 3.22).

Pubs, social clubs and most live music venues get a separate boost: relief rises "from 15% to 35% from 1 April 2027", except for venues with a rateable value of £1 million or more (para 6.189).

Not everyone gains. From April 2027, vape shops lose access to the RHL multipliers and Small Business Rates Relief, and Adult Gaming Centres lose the RHL multipliers (para 6.195). Some ratepayers whose bills fell or rose only slightly at the 2026 revaluation will keep paying a 1p Transitional Relief Supplement for two more years (para 6.193).

Online marketplaces collecting VAT

The Budget pays for part of the high street package by levelling up VAT collection online. "From October 2027 ... Online marketplaces will be responsible for collecting VAT on sales by UK VAT-registered businesses and any other UK business with a minimum annual sales threshold per platform of £90,000" (para 6.154). Personal sales, second-hand goods and business-to-business sales are excluded. The Treasury says: "The money raised from this policy will be reinvested into the high street through reductions to business rates" (para 2.44).

For a Nottingham independent that sells both in-store and through a marketplace, this is an administrative change as much as a cost one: the platform rather than the seller will collect VAT on qualifying sales. Check with your accountant how it affects your cash flow and your VAT returns. For shops that compete with sellers who were not charging VAT online, the change narrows a price gap that has worked against physical retail.

The Derelict Buildings Fund and the High Streets Strategy

The Budget launches a High Streets Strategy with "a 'High Streets First' principle for relevant public estates", reform of Business Improvement Districts, and "a £210 million package to revitalise derelict high street buildings" (para 3.25).

Within that, "Through the new £125 million Derelict Buildings Fund, the government will support English local authorities to transform buildings", and "An additional £65 million will be invested in helping communities across England rescue and revamp beloved buildings and businesses at risk of closure, like pubs and sports clubs" (para 4.66). The document does not make clear whether these two amounts form part of the £210 million package or sit alongside it.

Two things matter for a private business. First, the Derelict Buildings Fund goes to local authorities, not directly to owners or tenants, so any benefit will come through council-led projects. Second, if a council does bring a long-empty building back into use on a parade, that can improve footfall and the outlook for neighbouring shops, which in turn helps valuations. It is a reason to follow what Nottingham City Council and neighbouring councils bid for, not a source of finance for your purchase.

Empty property and online retail: watch this space

Two further items are commitments to look again rather than new rules. The government will "Engage with businesses and local government ... to understand how the system can better incentivise the reoccupation of empty properties" (para 3.25), and it "will continue to explore how the business rates system could better target online retailers" (para 3.24). Neither has a date or a figure attached. Do not build either into a business plan yet.

The East Midlands is also named in the first wave of Business Rates Retention Zones (para 4.61), within which billing authorities "can retain 100% of business rates growth above an agreed baseline for 25 years" (para 6.43), subject to business case approval and legislation. That gives councils a stronger reason to back commercial development, though it does not change any individual ratepayer's bill.

What this means if you are buying your shop

Lenders assessing an owner-occupier commercial mortgage look at whether trading profit covers the loan payments with room to spare. Business rates are an overhead in that calculation, so a lower bill means more profit available to service debt.

Illustrative example. An independent café owner trading from a rented unit on a Nottingham suburban parade is offered the freehold. The unit's rateable value is £16,500. Under the old 100% relief threshold of £12,000, a unit at £16,500 sat above the £15,000 tapered relief limit and received no Small Business Rates Relief. From 1 April 2027, assuming the café qualifies as RHL and meets the usual relief conditions, a rateable value of £16,500 falls below the new £18,000 threshold for 100% relief (para 6.190). The rates bill could fall to zero. In a lender's affordability model, that saving is added straight to the profit available to cover mortgage payments. The figures are illustrative only and do not take account of any other reliefs or local factors.

Lenders will usually want to see the saving in actual trading rather than just in a forecast. A purchase completing before April 2027 may be assessed on today's costs; one completing later can show the lower bill in management accounts.

Wage costs move the other way. From 1 April 2027 the National Living Wage rises 3.9% to £13.21 an hour (para 6.128), so a café or shop with several staff should set the rates saving against higher payroll before assuming any net gain.

What to do now

1. Find your rateable value on the government's business rates valuation service and check whether your property is likely to count as retail, hospitality or leisure.
2. Work out your April 2027 bill under the new thresholds or the CPI cap, and confirm eligibility with your council's business rates team.
3. Update your forecasts for 2027-28 with the rates change and the wage rise together. A lender will look at both.
4. If you sell online, ask your accountant how marketplace VAT collection from October 2027 affects your pricing and cash flow.
5. If you are buying, ask the seller or agent for the rates history and any appeals. Valuation Tribunal fees for appeals on the 2026 list are being abolished and fees already paid refunded (para 6.194).
6. Keep an eye on council bids to the Derelict Buildings Fund near any property you are considering.

Key dates

• 28 October 2026: Budget 2026 published
• 1 April 2027: higher Small Business Rates Relief thresholds for RHL properties; pub relief rises to 35%; CPI cap on RHL bills begins; National Living Wage rises to £13.21
• October 2027: online marketplaces start collecting VAT for UK sellers
• 2027-28 and 2028-29: RHL bill increases capped by CPI
• 2029: next business rates revaluation, when thresholds will be reviewed

Brought to you by Business Mortgages Broker

This guide was written by Business Mortgages Broker, which arranges owner-occupier business mortgages for UK trading companies, including shops, cafés and salons buying their own premises. Founder Matt Lenzie has 25 years in financial services, raising debt and equity, and has arranged around £400m of property finance. For buyers in the city and county, see owner-occupier business mortgages in Nottingham.

Source: HM Treasury, Budget 2026 (HC 726), 28 October 2026. This article is general information, not tax or financial advice.