A Perfect Storm for Small Businesses - Scotland's Rates Revaluation Under Scrutiny

15th December 2025

In Scotland, business rates (officially called non-domestic rates) are a property tax that most non-residential properties must pay.

The system works like this:

An independent Assessor assigns each non-domestic property a rateable value (RV) — an estimate of what it could rent for on the open market.

The Scottish Government sets a poundage rate (a tax per £ of RV).

Your business rates bill is calculated by multiplying the RV by the poundage, with any reliefs or discounts subtracted.

A revaluation is scheduled next for 1 April 2026 reassesses all non-domestic properties so that valuations reflect more current market conditions. Traditionally, revaluations should occur every three years in Scotland (the last took effect in April 2023).

Revaluations aren't taxes themselves and they change the "RV" figure that business rates are based on. However, large increases in RV usually mean a larger bill unless reliefs offset it.

One major relief scheme is the Small Business Bonus Scheme (SBBS). Under SBBS, businesses with combined RVs below certain thresholds (up to £35,000 across multiple properties or up to £20,000 for a single property) can receive partial or 100% relief so that they pay little or no rates.

Why the 2026 Revaluation Is Causing Alarm

1. Draft Rateable Values Are Increasing Sharply

In the draft valuations released ahead of the final revaluation, many businesses — particularly in tourism and accommodation — are facing very large increases in their rateable values. Early evidence indicates average rises around ~120%, with some as high as ~300% when compared with previous assessments.

These significant jumps are much larger than typical in past revaluations, and they come at a time when many tourism and hospitality businesses are already under serious financial strain because of broader cost pressures such as labour, energy and regulatory changes.

2. Flawed Data and Methodology

A central complaint from tourism bodies is that the valuation methodology used to determine the new draft RVs is not reflective of reality — especially for sectors like self-catering accommodation.

For instance, out of more than 16,000 self-catering units on the valuation roll, only a tiny fraction (about 501) are listed as “rented,” and the model used rental data from just 135 properties — less than 1% of the market. This produce unrepresentative results that don’t reflect how most operators actually operate or earn revenue.

The result is an RV model that businesses argue is built on inadequate evidence, leading to artificially inflated valuations. Those inflated valuations not only threaten to increase bills directly but also jeopardise eligibility for key reliefs.

3. Threats to Small Business Relief Eligibility

The Small Business Bonus Scheme (SBBS) creates a safety net that makes many small enterprises viable by dramatically reducing or eliminating their business rates bills. However, if a business’s RV rises above the SBBS thresholds after the revaluation, it may lose this relief entirely, causing a sudden and often unaffordable jump in costs.

For many rural and micro-business operators, the difference between being under and over the SBBS threshold is existential — meaning a relatively small change in valuation could put them outside relief and dramatically increase liabilities.


4. Wider Economic and Mental Health Consequences

Stakeholders are not only worried about financial impacts; they are also warning of deep psychological impact and stress on business owners struggling to make ends meet. Many operators have reported high levels of anxiety about the future of their businesses as draft valuations circulate and potential liabilities escalate.

Furthermore, tourism businesses are often cornerstones of local economies, especially in rural, island and remote areas. If many of these businesses were forced to downsize or close due to untenable rates bills, the economic and social impact could ripple outwards — reducing local employment, sinking tourism spend, and weakening community cohesion.
ASSC

What Industry Groups Are Calling For

Because of these concerns, a coalition of bodies including the ASSC, STA, Scottish Land and Estates, FSB and Scottish Agritourism have formally written to the Scottish Government’s Minister for Public Finance asking for urgent action. Their requests include:

A thorough review and adjustment of the valuation methodology so that it truly reflects real trading conditions and uses representative evidence.

Restoration and protection of SBBS thresholds to prevent sudden loss of relief for viable small businesses.

Targeted support or mitigation measures for businesses facing disproportionate increases.

Enhanced government engagement and scrutiny throughout the final stages of revaluation to avoid unintended harm.

These groups argue that without such reforms or support, the draft revaluation could cause lasting damage to Scotland’s tourism competitiveness and the resilience of small rural firms.

Why This Matters Now

The current period (through February 16, 2026) is the only time when businesses can respond to or challenge their draft RVs before they become legally fixed. Because of this “window of influence,” the stakes are very high: if objections aren’t submitted in time, businesses may be locked into valuations that could define their financial outlook for years.

At the same time, many small operators are already stretched thin because of rising costs in other areas and regulatory changes affecting tourism accommodation, making the prospect of significant new costs particularly threatening.

The current concern in Scotland about the 2026 business rates revaluation isn’t abstract. It’s grounded in the real risk of large valuation increases, inadequately evidenced methods, and the potential loss of crucial reliefs that underpin the viability of thousands of small and rural businesses, particularly in the tourism sector.

Groups like the ASSC, STA, Scottish Land and Estates, FSB and Scottish Agritourism are sounding the alarm because they see a system change that could weaken local economies, threaten jobs, and strain community life unless the Scottish Government intervenes with corrective measures and targeted support.