Wales has locked in transitional protection for business rates rises triggered by the 2026 revaluation. Welsh Statutory Instrument 2025 No. 1371, made on 17 December 2025 and in force from 31 December 2025, sets the rules for how bills are phased from 1 April 2026 to 31 March 2029. The regulations were approved by Senedd Cymru and published on legislation.gov.uk.

The scheme is targeted. It reduces increases rather than reshaping bills across the board. The explanatory note states the rules “reduce the increase in a ratepayer’s liability as a result of the 2026 revaluation” (legislation.gov.uk). In plain terms: if your valuation jumps, the uplift is softened; the rules do not phase in decreases.

The phasing is straightforward. In 2026/27, 67% of the increase between the 31 March 2026 liability and the 1 April 2026 liability is taken off the bill. In 2027/28, 34% of that same increase is deducted. From 1 April 2028 to 31 March 2029 there is no transitional deduction. Calculations are done per day, and the 2028 formula uses 366 to account for the leap year, but the annual effect is as above.

Eligibility matters. Relief applies only if several conditions are met on the relevant day: the property appears in the local or central rating list on 31 March 2026, on every day up to the day in question, and on that day; the person liable on 31 March 2026 is the same ratepayer on the day in question; the property was occupied on 31 March 2026; and there is no apportionment for part-occupation under section 44A of the Local Government Finance Act 1988. There is also a floor: the increase must exceed £300 before relief applies (legislation.gov.uk).

The regulations define two anchor figures. The “base liability” is the chargeable amount for 31 March 2026 (calculated under section 43 for occupied local-list properties or section 54 for central-list properties) multiplied by 365. The “notional chargeable amount” is the 1 April 2026 chargeable amount (under sections 43, 45 or 54, as appropriate) multiplied by 365. The difference between these two figures drives the deduction in 2026/27 and 2027/28.

If the underlying chargeable amount later falls during the period-for example after a successful challenge or a material change-the notional figure is recalculated from the effective date of that change. The formulas also ensure the chargeable amount never drops below zero. If a hereditament is removed from the list, the transitional rules stop from the date of removal; previous days already covered are unaffected (legislation.gov.uk).

A quick worked example helps. Suppose a shop’s annual chargeable amount is £25,000 on 31 March 2026 and £30,000 on 1 April 2026. The uplift is £5,000. In 2026/27, the deduction is 67% of £5,000 (£3,350), so the payable amount would be about £26,650. In 2027/28, the deduction is 34% of £5,000 (£1,700), so about £28,300 is payable. In 2028/29, the full £30,000 applies, subject to any other reliefs under the 1988 Act.

The rules also cover assets on the Welsh central list (maintained under section 52ZA), typically large network and infrastructure hereditaments. The same occupier-continuity test and £300 threshold apply. For most SMEs, though, the focus will be on the local list compiled on 1 April 2026 and the way the uplift is staged over two years.

Retail and hospitality operators in prime locations that have seen valuation growth are the most likely early beneficiaries, with the first-year relief taking out two-thirds of the uplift. Manufacturers facing plant-and-machinery adjustments may also see smoother bills. Firms relying on section 44A part-occupation relief should note that an active apportionment means these transitional deductions do not apply while that apportionment is in effect.

What finance teams should do now is pragmatic. Confirm who the liable ratepayer was on 31 March 2026 and evidence continuous occupation. Keep the 2025/26 demand notice because it anchors the base liability. Ask your billing authority to show the transitional deduction on the 2026/27 bill and factor in a step-up to roughly two-thirds of the uplift in 2027/28 before moving to the full amount from April 2028.

Governance and timing are clear. The Non-Domestic Rating (Chargeable Amounts) (Wales) Regulations 2025 revoke the 2022 Welsh rules and are made under sections 58 and 143A of the Local Government Finance Act 1988, which requires Senedd approval. Mark Drakeford signed the instrument as Cabinet Secretary for Finance and Welsh Language on 17 December 2025 (legislation.gov.uk).

For SMEs, the takeaway is simple. The 2026 revaluation shock is staged if, and only if, the occupier stayed the same, the property was occupied on 31 March 2026, the increase tops £300, and no section 44A apportionment applies. Build the glide path into cashflow, and watch for any valuation changes that could reset the calculations mid-period.