Business Rates
The question
To ask the Secretary of State for Housing, Communities and Local Government, what proportion of any increase in business rate receipts will be retained by local authorities.
Answered by Alison McGovern
The business rates retention system was set up in 2013-14 and enables local authorities to retain a proportion of the increase in business rates income – or growth – in their local areas, above a baseline set according to individual level of need, on implementation.
For most local authorities, the proportion they retain is 50% across the local area, subject to a levy on that growth. Some authorities have arrangements meaning they retain a higher proportion of growth of up to 100%, and may pay no levy on this amount.
In 2026-27, the system was reset, meaning growth is redistributed between local authorities in line with need, as part of the Fair Funding Review 2.0, delivered through the local government finance settlement. From 2026-27, local authorities will continue to retain their proportion of new growth above their new baseline funding need, subject to a levy.
I refer the Rt. Hon. Member to the answer given to Question UIN 107993 on 28 January 2026, and to Question UIN 113106 on 26 February 2026 on the specific interaction of business rates tax changes (the 2026 Revaluation, and the introduction of additional multipliers from 2026-27) on local authority income.
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