Budget 2025 - The New "Warehouse Tax": What It Is and Why It Matters

27th November 2025

In the 2025 Autumn Budget, the UK government introduced a significant reform of the business-rates system — a reform that has quickly become known in the media and logistics sector as the "warehouse tax."

Despite the name, this is not a brand-new tax created specifically for warehouses. Instead, it is a restructuring of existing Business Rates, the property tax paid annually by all commercial premises.

The effect of the reform, however, is that large warehouses and distribution centres will pay more, while traditional high-street retail and hospitality businesses will pay less. This redistribution is why the label “warehouse tax” has emerged.

At the centre of the change is the government's goal of creating a more level playing field between physical retailers and the booming online-commerce sector.

For years, critics argued that brick-and-mortar shops were disadvantaged: they paid high business-rate bills tied to premium retail locations, while vast fulfilment centres used by online giants benefited from relatively lower rates per square metre.

The new Budget addresses this by permanently reducing business-rate multipliers for retail, hospitality, and leisure properties, while raising the relative multipliers applied to non-RHL properties, a category that includes most warehouses.

Beginning in 2026/27, shops, pubs, cafes, and similar venues will receive reduced multipliers, lowering their annual business-rates bills. Warehouses, on the other hand, fall into the “Other” property category, where their multipliers will now be higher than for the protected retail and hospitality sectors.

For smaller and medium-sized warehouses — especially those used by online sellers and fulfilment operators — this creates a noticeable increase in annual tax obligations. For large distribution centres, the impact is even more significant because many of these sites have rateable values well above £500,000, placing them in the highest tax bands.

Logistics industry groups, including Logistics UK, have warned that these reforms will “disproportionately” affect warehouse operators, pushing up costs across the supply chain. Increased business-rate liabilities may lead some operators to raise fulfilment fees, adjust delivery prices, or pass on costs to end customers — particularly affecting online retail models that rely on tight margins and high volumes.

From the government’s perspective, the policy is intended to rebalance the retail landscape. High-street businesses have struggled with rising costs and declining footfall, while online commerce has grown rapidly. By reducing tax on physical retail spaces and increasing the burden on warehouses, the Budget aims to support local economies and protect town-centre businesses. Whether this shift will meaningfully change consumer behaviour or simply increase operational costs for online sellers remains an open question.

What is clear is that the “warehouse tax” is best understood not as a standalone levy, but as a structural shift in commercial property taxation.

It marks a deliberate reallocation of costs from high-street shops to the supply-chain infrastructure that powers online shopping. For operators of warehouses and distribution centres, especially those serving e-commerce, this reform will shape financial planning and pricing strategies for years to come.