Non-domestic rates differential multipliers: integrated impact assessment

Background

Non-domestic rates contributes over £1.1 billion annually towards the funding of essential public services provided by local government in Wales. The multiplier is a key determinant of the non-domestic rates bills that ratepayers are required to pay. Non-domestic rates liability, prior to the application of any reliefs, is calculated by taking the rateable value of the property, as determined by the independent Valuation Office Agency, and multiplying it by the multiplier, which is set annually by the Welsh Government. 

A single NDR multiplier currently applies to all hereditaments (units of non-domestic property with a rating assessment) in Wales. The Local Government Finance (Wales) Act 2024 introduced new powers for the Welsh Ministers to make regulations which prescribe differential multipliers based on the rateable value of properties on a local or central rating list, description (which reflects the broad type) of local list properties, or location of local list properties. 

Different systems of multipliers exist elsewhere in the UK. In England, a lower multiplier applies to small properties (with rateable values below £51,000) and all others are subject to the standard multiplier. From 2026 to 2027 onwards, the UK Government will introduce further lower multipliers for retail, leisure and hospitality properties and a higher multiplier for properties with ratable values of £500,000 and above. In Scotland, one of three multipliers applies based on the rateable value of a property, in the form of a basic rate (up to £51,000), an intermediate rate (£51,001 to £100,000), and a higher rate (above £100,000). In Northern Ireland, multipliers are set locally, whereby a central rate is supplemented by a rate set in each district council area.

Proposal

The Welsh Government enabling the introduction of a lower multiplier for small to medium sized retailers. This policy recognises the unique challenges faced by ‘bricks and mortar’ retail shops, not least through their exposure to competition from online retailers. A lower multiplier is intended to help re-balance the non-domestic rates system in favour of retail shops, to support the ongoing viability and sustainability of the sector. The Welsh Government’s shared strategic vision for the retail sector and retail action plan recognises that a strong retail sector is integral to vibrant and sustainable high streets and town centres.

The lower retail multiplier will apply to properties with rateable values below £51,000 and which are identified as shops, kiosks, pharmacies or post offices by their description in a local rating list. This includes nearly 95% of all shops, but intentionally excludes large shops, department stores, hypermarkets and superstores. Around 13,000 properties (in addition to the 50,000 properties occupied by small businesses across Wales which already attract full relief) will benefit from a lower retail multiplier.

The Welsh Government is also enabling the introduction of a higher multiplier for high value properties, to offset the revenue which would be foregone through the lower retail multiplier. A higher multiplier would levy a modest amount of additional revenue from the largest (by value) properties in the tax-base. This would ensure the standard multiplier, applicable to all properties which were not subject to the retail or higher multipliers, could be set at the lowest possible level (while also ensuring there is no change to the overall amount of non-domestic rates revenue).

A higher multiplier would apply to properties with a rateable value above £100,000. As far as possible, it would not apply to specific property types which are occupied by public sector bodies or other institutions which are largely sustained by public funding models. The following property types would be excluded from a higher multiplier based on their description in a local rating list: hospitals, surgeries, health centres, schools, colleges, universities, libraries, museums, leisure centres, cemeteries, crematoria, fire stations, ambulance stations, police stations, prisons, courts and auxiliary defence establishments. A higher multiplier would apply to around 3,200 properties (2.5% of all properties in the tax-base).

Consultation

An open public consultation on the proposal was undertaken from 20 May to 12 August 2025. The findings of the consultation have been used to inform the assessment of the impacts and related conclusions.

How have people most likely to be affected by the proposal been involved in developing it?

An open public consultation seeking views on the policy was undertaken between 20 May and 12 August 2025. The consultation was brought to the attention of relevant stakeholders. It received 172 responses from a range of stakeholders, including businesses, individuals, local authorities, sector representatives, professional bodies, rating agents and academics. A summary of responses was published on 7 October 2025.

A majority of respondents supported the consultation proposals, with a particularly high level of support for a lower retail multiplier. Some stakeholders expressed a preference for a lower multiplier which applied to other sectors of the economy or were concerned about the potential application and level of any higher multiplier.

What are the most significant impacts, positive and negative?

The primary positive impact of the policy will be reduced non-domestic rates liabilities for small to medium sized retailers, in line with the intention to re-balance the system. This is likely to result in significant savings for eligible retailers, which may help reduce pressures from financial overheads, meet other costs and enable investment in their business, supporting the ongoing viability and sustainability of the sector. 

The primary negative impact of the policy will be non-domestic rates liabilities which are marginally higher than they otherwise would be for properties subject to the higher multiplier. It is anticipated that a marginal supplement on the higher multiplier would be sufficient to support a substantially lower retail multiplier. 

The impacts of the policy on non-domestic rates liabilities will be proportionate to the rateable values of individual properties and dependent on the level at which differential multipliers are set, relative to the standard multiplier. This will be determined as part of the Welsh Government’s budget setting process. 

There may be wider indirect positive economic impacts of the policy. The maintenance of a viable retail sector will help to sustain the local economies and employment opportunities it supports. Other sectors of the high street economy would also be expected to benefit indirectly, through the visitor footfall supported by the retail sector. 

There may also be indirect positive impacts for some disadvantaged areas and people, including those affected by digital exclusion, who are particularly reliant on access to local shops. In Wales, 7% of adults are not online, which is higher than the UK average and disproportionately affects certain groups (older people, disabled people, people with long-term health conditions, people with lower educational attainment and socio-economic advantage, rural communities and people who do not use English as their first language).

In light of the impacts identified, how will the proposal:

• maximise contribution to our well-being objectives and the seven well-being goals

• avoid, reduce or mitigate any negative impacts?

The policy intention and anticipated impacts will support some of the well-being goals for Wales set out in the Well-being of Future Generations (Wales) Act 2015. In particular, supporting a strong retail sector, which is integral to vibrant and sustainable high street and town centre economies, will contribute to the well-being goal of a more prosperous Wales. The potential indirect benefits for disadvantaged areas and people, through sustained access to local shops, will also contribute to the well-being goals of a more equal Wales and a Wales of cohesive communities.

The design of the higher multiplier has taken account of the composition of the relevant part of the tax-base. Exclusions from the application of a higher multiplier will ensure that, as far as possible, it will not apply to properties occupied by public sector bodies or other institutions which are largely sustained by public funding models. This is intended to mitigate any negative impact on non-domestic rates liabilities for those ratepayers. The Welsh Government has not identified any unintended negative impacts of the policy which warrant additional mitigations.

The Welsh Government recognises that there will be a balance to strike in the setting of the differential multipliers, particularly in relation to the implications for the levels of the standard multiplier and a higher multiplier (to maintain the same overall non-domestic rates revenue). The levels of all multipliers for 2026 to 2027 will be determined towards the end of 2025, when all relevant information is available to inform those decisions. 

How will the impact of the proposal be monitored and evaluated as it progresses and when it concludes?

Data on non-domestic rates will continue to be received from local authorities and the Valuation Office Agency on an annual basis. This will enable the Welsh Government to monitor the number of properties subject to either the retail multiplier or the higher multiplier, as well as their contribution to overall non-domestic rates revenue. This information will be used to inform the maintenance of differential multipliers, as part of the annual setting of all multipliers.

It will not be possible to isolate the impact of this policy from the activities set out in the Welsh Government’s retail action plan and wider economic factors. The retail action plan refers to a range of data sources which will inform our understanding of the general health of the sector.