Wales has signed off a new transition for business rates as the 2026 revaluation approaches. The Non-Domestic Rating (Chargeable Amounts) (Wales) Regulations 2025 were made on 17 December 2025, come into force on 31 December 2025, and apply from 1 April 2026 to 31 March 2029. The instrument, published on legislation.gov.uk and signed by Mark Drakeford as Cabinet Secretary for Finance and Welsh Language, sets out how bills will be smoothed over the first two years of the new list.

The policy aim is straightforward: ease sharp jumps in non-domestic rates caused by the 2026 list. In 2026/27, 67% of any increase above your 31 March 2026 position is removed; in 2027/28, 34% is removed; from April 2028, the full calculated bill applies. The approach mirrors prior Welsh practice of phasing increases rather than holding bills flat.

Eligibility matters. The rules apply to ‘defined hereditaments’ that appear in the local or central list on 31 March 2026, remain on the list continuously, and were occupied on that date. The person liable on 31 March 2026 must be the same ratepayer on the relevant billing day. If the property was empty on 31 March 2026, or the liable ratepayer changes at any point during the period to March 2029, the transitional reduction does not apply.

There is a small-change threshold. Transitional relief only engages if the 2026 notional bill is more than £300 higher than the 31 March 2026 bill. Below that, there is no phasing and the increase is payable in full. Importantly for firms expecting a downward revaluation, reductions are not capped by these rules-lower bills flow through immediately.

Think of the mechanics as ‘smoothing the jump’. First, establish your base liability as at 31 March 2026. Then calculate your notional 2026/27 bill without relief. The difference between those two figures is your ‘uplift’. In 2026/27 you pay your base plus roughly one third of that uplift; in 2027/28 you pay your base plus roughly two thirds; from April 2028 you pay the full amount, assuming no other changes.

A simple example helps. If your 2025/26 annual liability was £15,000 and your 2026/27 notional liability would be £18,000, the uplift is £3,000. In 2026/27 the rules remove 67% of that uplift (£2,010), so you pay £15,990. In 2027/28 they remove 34% of the original uplift (£1,020), so you pay £16,980. From April 2028 you pay the full £18,000. Councils calculate this on a daily basis, so exact bills reflect day counts.

Mid-year changes are covered. If your chargeable amount drops after 1 April 2026-for example, following a successful list change-the ‘notional’ figure is recalculated from the effective date of that change. The regulations also account for 2028 being a leap year when pro-rating daily amounts. If a property is removed from the rating list, the transition stops from the removal date; earlier days remain as calculated.

Watch the traps that remove eligibility. Group restructurings that change the named ratepayer, sale-and-leaseback deals concluding on or after 1 April 2026, or moving to a new legal entity can all switch off the transition. If stability is worth more than a cleaner corporate structure next spring, time any reorganisation with care.

Part-occupation is another trade-off. Section 44A part-occupation apportionments are expressly excluded from these rules. If you plan to mothball a floor or split space, you may gain on part-occupation relief but lose the two-year smoothing on the whole. Model both routes with your adviser and speak to the billing authority before committing.

For SMEs, the cash flow read-across is clear. A family-run café in Cardiff facing a £3,000 rise will see roughly £2,010 of that increase knocked off in 2026/27 and £1,020 knocked off in 2027/28. That gives a two-year window to reprice menus, renegotiate energy contracts or adjust staffing without absorbing the full hit on day one.

This is not a new relief pot and it sits alongside other schemes set annually by Welsh Ministers. It simply tells billing authorities how to calculate the ‘chargeable amount’ for eligible properties during the transition. The 2022 Welsh chargeable-amounts regulations are revoked, so the 2026 framework replaces them in full.

Our view: this is sensible smoothing that protects working capital but does not remove the underlying change. If your revaluation points to a larger bill, treat 2026/27 and 2027/28 as a runway to the new steady state in April 2028. Ring-fence part of the saving each month so the move to the full bill in 2028 does not come as a shock.