On 13 January 2026, the final Scottish Budget of this Scottish parliamentary term ahead of May’s Holyrood election was published. The Scottish Budget for 2026/27 does not introduce wholesale reform to non-domestic rates. In this article we consider what the Budget means in practical terms for the commercial real estate market in Scotland and how it differs from the measures proposed in England and Wales.
Business rates: relief worth £864 million, but no redesign
Non-domestic rates (NDR), often described as business rates, remain one of the most significant costs for occupiers and, indirectly, for landlords. In the 2026/27 Budget the Scottish Government confirmed an NDR relief package estimated (by the Scottish Government) at £864 million, including targeted measures for retail, hospitality and leisure (RHL) occupiers.
NDR is administered and collected by local authorities and levied on land and heritage used for non-domestic purposes in the public, private, and third sectors.
Non-domestic rates are calculated by multiplying a property’s rateable value (minus applicable reliefs) by the relevant property rate. In 2026/27, the Scottish Government has reduced the Basic, Intermediate, and Higher Property Rates. This reflects growth in rateable values at the next revaluation on 1 April 2026 and is intended to be revenue neutral overall.
Reliefs
A new 15% NDR relief from April 2026 to March 2029 applies to RHL premises liable for either the Basic or Intermediate Property Rates. The relief is capped at £110,000 per ratepayer and is expected to benefit up to 37,000 properties, reducing NDR bills by around £36 million in 2026/27. The Budget also extends and expands 100% relief for RHL properties on defined islands and certain remote areas for a further three years, again subject to a £110,000 cap.
Additionally, the Small Business Bonus Scheme remains in place at the same rates and thresholds for the next three years, removing or limiting liability for many smaller enterprises.
There are also various transitional reliefs introduced to soften the blow of the revaluation cycle as well as 100% relief for eligible Electric Vehicle-charging points for 10 years from 1 April 2026.
For tenants, this supports short-term affordability. For landlords, it supports tenant resilience in sectors sensitive to operating costs. However, the relief is policy-driven and time-limited rather than structural, meaning the underlying design of business rates remains unchanged, and this remains a criticism from various business groups.
Comparison with England and Wales
The position in England and Wales is evolving along a different policy trajectory, with a focus on embedding targeted support within the business rates system rather than relying on repeated temporary relief.
England and Wales are introducing a permanent, uncapped tiered multiplier framework from April 2026. Lower-value properties benefit from comparatively reduced multipliers, while higher-value properties face increased ongoing liability. Long-term stability is offered by baking lower rates directly into the tax system for properties worth under £500,000, with a multiplier 5p below the small business and standard multiplier applying. However, for properties with rateable values exceeding £500,000, a multiplier 2.8p above standard applies, with the underlying logic being that this would enable the lower multiplier to be sustainably implemented. This structural approach is intended to reduce reliance on annual or short-term relief packages and provide longer-term predictability for eligible premises. By removing the cash caps that previously limited support for large portfolios, the UK Government has cleared the way for major brands to benefit from lower multipliers across every qualifying branch they own. This creates a powerful incentive for large-scale occupancy on the high street.
This contrasts with the Scottish position. Scotland continues to apply capped and time-limited relief, including a 15% discount for RHL properties more broadly. This relief is still tied to a strict £110,000 per-business cap, and for a large operator with multiple locations, this cap is often reached quickly, leaving most of their portfolio paying the full, higher tax rate. Furthermore, Scotland’s “top-tier” tax rate takes effect much sooner, impacting properties worth over £100,000 compared to England’s £500,000 threshold. While this can deliver meaningful short-term savings for those sectors, the relief is temporary and remains contingent on future budget decisions.
Targeted pub relief and a hospitality lifeline?
Following backlash against the 2025 Autumn Budget, Chancellor of the Exchequer Rachel Reeves introduced an emergency support package offering targeted business-rates support for pubs and live music venues. It outlined a 15% discount for eligible pubs and live music venues in England from April 2026. This is applied on top of the new lower RHL multipliers, and eligible venues’ bills will be frozen in real terms (rising only by inflation) for two years following the 2026/27 financial year. While pubs face an average 30% rise in rateable values due to the 2026 revaluation, the 15% discount is intended to ensure that 75% of pubs see their actual bills stay flat or fall.
The announcement followed industry concern about the impact of rates on high street venues and reflects a stated policy objective of protecting community and town-centre uses. Crucially, however, the measure excludes other hospitality and leisure businesses, like hotels, restaurants and cafés – all of which remain exposed to significant tax increases; these businesses must rely solely on the new tiered multiplier system without the additional 15% “buffer” afforded to their counterparts in the licensed trade.
Contrastingly, in a budget update in February 2026, Scotland chose a broader but more capped approach. The Scottish Government recently increased relief for all licensed premises – including restaurants and hotels – to 40% in a late budget deal. While this headline figure is more generous than the English offering, it remains hampered by a strict £110,000 per-business cap. Consequently, while a small independent restaurant in Scotland may enjoy lower rates than one in England, for the next three years a national chain may find the Scottish system more punitive. Unlike England, this applies to all licensed hospitality premises, including restaurants, hotels, and nightclubs, not just pubs. The caveat, however, is that this relief is strictly subject to a £110,000 cap per business. While beneficial for small and medium enterprises (SMEs), large operators with multiple sites will hit this cap quickly, leaving most of their portfolio paying full rates.
Takeaway
Ultimately, for occupiers and investors operating across the UK, the distinction is now one of design and predictability. England and Wales are prioritising long-term structural certainty, with targeted intervention – such as the specific support for pubs – where politically justified. While large hospitality groups will find the English system increasingly favourable for expansion due to the lack of cash caps, the picture is more fragmented for mixed portfolios where restaurants and cafés do not share the same protections as pubs. Scotland, by contrast, continues to offer immediate but temporary support within a strictly capped framework.
This article was co-authored by Trainee Mia Ibrahim.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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