The UK has the highest commercial property tax burden of any major economy, according to a new report from global tax firm Ryan. The firm found the UK ranks first globally for property taxes as a share of GDP.
The findings come as thousands of companies across England, Wales and Scotland prepare for higher business rates bills in 2026/27, with total receipts forecast to climb from £33.6 billion to £37.1 billion. But business groups warn that rising commercial property taxes could discourage investment.
Why Is the UK’s Commercial Property Tax Burden So High?
The UK’s commercial property tax burden is so high because it relies heavily on business rates, a property-based tax that rises with property values and inflation rather than business profits. This means tax bills increase even when businesses are not seeing higher earnings.
Business rates receipts are forecast to increase from £33.6 billion to £37.1 billion in the 2026/27 tax year, following the latest revaluation across England, Wales and Scotland. These revaluations, combined with inflation-linked adjustments and the gradual withdrawal of pandemic-era relief measures, are increasing overall tax liabilities for businesses across the UK.
Unlike profit-based taxes, business rates are charged on the rateable value of commercial properties. As property values and inflation rise, businesses face higher bills regardless of profitability, which helps explain why the UK consistently ranks at the top of global property tax comparisons.
How Do Business Rates Add to UK Property Tax Burden?
Business rates increase the UK’s property tax burden because they create a large, unavoidable cost for businesses that rises with property values rather than profits.
This means that if the value of the property a shop, office, warehouse or hotel operates from increases, the tax bill automatically goes up. Unlike taxes linked to profit, business rates are based on the property a business occupies, which makes them a permanent cost of simply staying in operation.
The impact is especially strong in sectors such as retail, hospitality and leisure, where businesses depend heavily on physical locations to trade. In these industries, occupying premises is essential, so higher business rates directly increase day-to-day running costs and reduce the amount of money available for reinvestment or growth.
At the same time, many of these businesses are already under pressure from rising wages, higher energy bills and increased borrowing costs. When business rates rise on top of these expenses, they add to the overall cost and make it harder for companies to maintain healthy profit margins.
Can Business Rates Discourage Investment in the UK?
Business rates may discourage investment in the UK because they often go up when a business expands or improves its physical premises.
This happens because business rates are based on the value of the property a business occupies. So, if a hotel, shop or restaurant moves into a larger building, or upgrades its existing premises, the property is usually considered more valuable. When that happens, the business can end up paying higher business rates.
For example, if a hotel adds more rooms, builds new facilities or moves to a better location, the overall value of the property is likely to increase. When the property is revalued, the business may face a higher tax bill because the building is now worth more.
This is where the concern comes in. Businesses in sectors like retail, hospitality and leisure often need to invest in physical space to grow. But if that investment leads to higher taxes, it can make expansion feel more less rewarding.
Meanwhile, this tax burden affects digital businesses less because they do not rely on large physical premises. With lower property needs, they tend to face lower business rates, which has led to concerns that the system may favour online companies over traditional high-street businesses.
Conclusion
With commercial property taxes already at globally high levels, UK businesses are expected to face sustained cost pressures heading into 2026/27.
For many firms, the key challenge will be adapting to rising fixed costs while maintaining competitiveness in an increasingly tight operating environment.
The debate over whether the current system supports or hinders long-term economic growth is therefore likely to continue well beyond the latest revaluation cycle.
FAQs
Business rates are a tax charged on most non-domestic properties, such as shops, offices, warehouses and hotels. The amount paid is based on the “rateable value” of the property, which reflects its estimated market rental value.
Business rates are high in the UK because they are based on commercial property values rather than business profits, and they are regularly updated through revaluations and influenced by inflation.
Business rates can sometimes be reduced by checking whether the property’s rateable value is correct, applying for available reliefs (such as small business relief or sector-specific support), or appealing the valuation if it appears too high. Some businesses may also qualify for exemptions or temporary discounts depending on their circumstances.
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