16 December 2025 Ivan McKee MSP Minister for Public Finance Scottish Government St Andrew’s House Regent Road Edinburgh EH1 3DG By email: MinisterPF@gov.scot Dear Minister Non-Domestic Rates: 2026 draft rateable values I’m writing to share FSB Scotland’s concerns regarding the 2026 non-domestic rates (NDR) revaluation, following the issuing of the draft rateable values (RVs) at the end of last month. I appreciate you are already live to this issue, and it was welcome to hear the First Minister note his own concerns during last week’s session of First Minister’s Questions. We are being contacted by ever-growing numbers of small businesses daily, each reporting significant increases in their proposed RVs from 1 April 2026. While there are issues across all types of businesses, some sectors such as retail, hospitality and self-catering providers appear to be among the hardest hit. Concerns are being reported from across the country, from pubs in Glasgow discovering they may need to pay £15,000 a year more and a Post Office in Moray whose bill looks like it will go up by £4,000. I scarcely need to tell you that this couldn’t have come at a worse time for our small businesses. As you know, they’ve faced extremely challenging economic conditions in the last five years, and margins in particular sectors are incredibly tight. Ever increasing input costs, combined with turnovers that are now falling, mean any remaining profitability is being squeezed out of businesses. And, of course, any boost those in the retail, hospitality and leisure sectors may have been hoping for during the so-called “golden quarter” in the run-up to Christmas faces being wiped out by the looming increase in their rates bill come the spring. A reduction in businesses’ ability to make a profit is not just a concern for them – it has wider T E W
0808 202 0888 customerservices@fsb.org.uk fsb.org.uk
A
FSB, 3rd Floor, 10 Dean Farrar Street, London, SW1H 0DX
Registered Office: National Federation of Self Employed and Small Business Limited, Sir Frank Whittle Way, Blackpool Business Park, Blackpool, FY4 2FE Registered in England: 1263540
implications in terms of, for example, their hiring capacity. With economic inactivity levels in Scotland persistently high, and small businesses more likely to hire those furthest from the labour market, it’s crucial that we don’t erect further barriers, in the form of costs, to them being able to continue to do so. As you know, FSB publishes the results of our small business index quarterly. The last results (Q3, 2025) showed a further decline in Scottish small business confidence, with the overall reading falling to a rating of -57.8, a significant decline on the previous quarter (-22). The results also showed that 29.1% of small firms expect to contract in the next 12 months, compared to just 6.4% expecting to grow. Therefore, at next month’s Scottish Budget, there are two key actions with regards to NDR that the government must take in order to shelter small businesses from the threat of huge rises in their bills. The first is with regards to the poundage. While we have welcomed the Scottish Government freezing the multiplier over the last three years, the results of the draft 2026 revaluation mean that we must now ask that it is lowered, in order to mitigate the extent to which rates bills will increase next year. Further, we believe that the extent to which proposed increases to RVs are concentrated in particular sectors provides further evidence for a separate, lower multiplier to be introduced for businesses operating in the retail, hospitality and leisure sectors. Further, a key area of concern for us is with regards to the loss of Small Business Bonus Scheme (SBBS) relief for a significant proportion of small businesses, whose proposed increases to their RVs will take them out of the scheme’s scope. As you know, changes to the thresholds for SBBS three years ago resulted in many small businesses partially, or totally in some cases, losing their rates relief. With the transition period for the previous revaluation scheduled to come to an end in April, those affected are now not only facing a full rates bill for the first time, but one even higher than they were anticipating. Accordingly, we are calling on the Scottish Government to bring forward changes to the thresholds for SBBS relief and restore them to at least the levels they were set at before they were reduced at the 2022 Budget. However, given the scale of some of the increases to RVs we are seeing, we are concerned that even that will mean that the Scottish Government’s previous commitment to keep 100,000 businesses out of NDR altogether will be eroded even further. At the absolute minimum, transitional relief for those impacted by the most significant RV increases is essential. From a longer-term view, I must also flag our disquiet about how some of the increases to RVs have been calculated: in a lot of the cases we’re seeing, it is difficult to understand the methodology behind these. We have long been of the opinion that having multiple assessors has created an inefficient, confusing rates system in Scotland, while there is one Valuation Board in England. In our view, the existence of Revenue Scotland offers an opportunity to address some of the issues with our NDR system, which we are seeing play out in real time following the draft revaluation. T E W
0808 202 0888 customerservices@fsb.org.uk fsb.org.uk
A
Sir Frank Whittle Way, Blackpool Business Park, Blackpool, FY4 2FE
Registered Office: National Federation of Self Employed and Small Business Limited, Sir Frank Whittle Way, Blackpool Business Park, Blackpool, FY4 2FE Registered in England: 1263540
I hope this is helpful in your ongoing consideration of this issue. Ahead of the January Budget, I would of course welcome the opportunity to meet with you to discuss these concerns in more detail, and maybe even let you hear directly from some affected businesses from within our membership. My colleagues in the FSB Scotland team would be happy to coordinate potential times for this with your office.
Yours sincerely,
Guy Hinks Chair, Federation of Small Businesses (FSB), Scotland
T E W
0808 202 0888 customerservices@fsb.org.uk fsb.org.uk
A
Sir Frank Whittle Way, Blackpool Business Park, Blackpool, FY4 2FE
Registered Office: National Federation of Self Employed and Small Business Limited, Sir Frank Whittle Way, Blackpool Business Park, Blackpool, FY4 2FE Registered in England: 1263540