Andy Burnham has launched a review into how business rates are calculated for pubs and hotels, in an attempt to make the tax fairer for two sectors hit hard by this year’s revaluation.

The prime minister has appointed Jerry Schurder, a business rates expert who has repeatedly called for reform of the levy, to lead an independent review into valuations. Schurder will report his recommendations to the Treasury by March 2027, in time for them to be implemented at the next revaluation.

Government insiders said they expected the review to lead to a major change in business rates, given his previous comments and the evidence he has submitted to earlier government consultations.

Schurder has called for “fundamental reform, not tinkering”, including pressing for business rates to be cut significantly to ensure competitiveness with local property taxes in the EU.

He has stopped short of saying business rates should be scrapped altogether. He has said revaluations should be undertaken annually, and that the revenue HMRC takes from business rates should fluctuate directly in line with changes in property values. Both proposals, if adopted, would change the tax from a fixed sum the Treasury collects regardless of market conditions into one that moves with the property cycle.

The government is also launching a call for evidence from landlords, brewers, hoteliers and business owners.

Why April hurt

The review follows concerns that the way businesses are valued does not reflect the realities of the pub and hotel market.

Pubs are not valued on floor space in the way an office or a warehouse is. They are valued on their fair maintainable trade, an estimate by the Valuation Office of the annual turnover, excluding VAT, that the property might be expected to achieve under reasonably efficient management. Trading history, location, food, accommodation and gaming income all feed into the figure, and a percentage is then applied to arrive at a rateable value.

That method is what made this year’s revaluation so painful. The rateable values that took effect on 1 April 2026 were based on trading conditions in April 2024. The previous list had been drawn from a 2021 baseline, when pandemic restrictions had flattened pub takings. Comparing a recovered year with a shut one produced steep increases across the sector.

The ending of those pandemic-era valuations sent some pubs and hotels out of business in April and left others teetering on the edge. In the hotel sector, the scale of the shift prompted calls to freeze revaluations altogether after Northern Ireland paused its own process.

A cut that did not reach everyone

Last month Burnham announced a 20 per cent cut to business rates for pubs, social clubs and live music venues from April 2027. The government said the measure would be worth about £1,100 a year to a typical pub and would reach nearly 32,000 venues, at a cost of £100 million a year, funded by reviewing reliefs for businesses that do not contribute and by tightening compliance among online marketplace sellers.

That announcement was largely welcomed, but it came with calls to apply the relief to a wider range of businesses and to go further with broader changes to the system. Ahead of it, there was disquiet that relief would be targeted at pubs alone while restaurants, hotels and leisure operators facing similar increases were left out, and hotel and holiday park bosses pressed for relief to be extended beyond pubs.

The distinction between the two interventions matters for anyone budgeting beyond next spring. The 20 per cent cut is a discount applied to a bill. The review deals with the number the bill is calculated from, and would reset valuations permanently rather than for the life of one relief scheme.

James Murray, financial secretary to the Treasury, said: “Pubs and hotels are vital for communities and bringing growth to every postcode.

“Last month we announced tax cuts for pubs to give them the breathing room they need. Today we’re going further with a rethink of valuations, so that we can build a fairer system for the future.”

Emma McClarkin, chief executive of the British Beer and Pub Association, said: “For years pubs have paid a disproportionately higher business rates bill which has ground down their ability to keep the doors open, so this review is sorely needed and hugely welcome.”

Neal Jones, EMEA president at Marriott International, said: “The current valuation methodology creates a significant burden for hotels, and it is right that the system is being examined to ensure it is fair, transparent, and reflective of today’s market realities.”

Allen Simpson, chief executive at UK Hospitality, said: “Business rates remain a significant burden for hospitality businesses and the system needs to better reflect the trading realities for the sector.

“Comprehensive review and reform can address these challenges, while also supporting investment and growth.”

For operators, the immediate practical point is the call for evidence. It is open to landlords, brewers, hoteliers and business owners, which means the trading data that has been used to argue the current method is unfair can be put in front of the person writing the recommendations rather than only in front of a trade body.

The timing also leaves a gap. Schurder does not report until March 2027, and any change he recommends lands at the next revaluation, so the bills that arrive next April will still be calculated the way this year’s were.

Nearer term, No 10 has said it will look to set out further reform, including small business rates relief, at the budget. That is the moment for firms outside the pub, club and live music categories to find out whether the wider changes they have been asking for are coming, or whether they wait for Schurder.

Jamie Young

Jamie Young is Senior Reporter at Business Matters, covering SME finance, employment law and Westminster policy since 2016. He has reported on every Budget and Autumn Statement since 2018, helped make sense of the ‘covid era’ and the bounce-back loan scheme from launch through the fraud investigations, and broke the magazine’s coverage of the 2024 late-payment reforms. He joined Business Matters straight from completing his BA in Administration from Exeter University and is NCTJ-qualified. Reach him at jyoung@cbmeg.co.uk