- Britain now has the highest property tax burden among major advanced economies.
- Businesses tied to shops, offices and warehouses say rising taxes are hurting investment plans.
- As digital firms operate with lighter footprints, pressure is growing on the UK’s physical economy.
Britain’s economy has changed dramatically over the past decade. Offices are quieter, shopping has shifted online and many companies now operate with fewer physical assets than ever before. Yet the country’s tax system still leans heavily on land, buildings and physical space.
From business rates and council tax to stamp duty, property-linked taxes now generate roughly £100 billion ($136 billion) a year for the government. According to analysis by Ryan, a tax firm, the UK has the highest property tax burden among major advanced economies, with such taxes accounting for 3.7 per cent of gross domestic product. France and Canada follow at 3.4 per cent, while Belgium and Luxembourg stand at 3.3 per cent.
The figures are becoming increasingly significant at a time when Britain is trying to encourage investment and economic growth while also dealing with stretched public finances. Nearly 11 per cent of all government revenues in the UK now come from property taxes, making the country one of the most reliant economies on property-linked revenue streams in the developed world.
But the growing dependence on these taxes is also exposing a tension that businesses say is becoming harder to ignore.
“Business property is carrying a disproportionate share of the overall tax burden, and that is beginning to weigh heavily on investment, particularly in sectors that rely on physical assets and long-term capital,” Alex Probyn, practice leader at Ryan, reportedly said.
That pressure is being felt most strongly by businesses that still depend on physical presence — retailers, pubs, restaurants, warehouses, hotels and manufacturers. While digital businesses can increasingly operate with remote workers, smaller office footprints and lower overheads, companies tied to commercial property continue to face rising rates and occupancy costs.
The businesses still tied to physical space
The latest revaluation of business rates across England, Wales and Scotland has added fresh pressure. Business rates receipts are forecast to rise to £37.1 billion in the 2026-27 financial year, up from £33.6 billion the previous year.
For many firms, the increases are arriving at an uncomfortable moment. Hospitality businesses in particular have already been dealing with higher wage bills, energy costs and weaker consumer spending. Industry experts have warned that revised property valuations could push tax burdens even higher for pubs, restaurants and hotels already operating on tight margins.
Nearly 40,000 businesses have appealed against their revised business rates, arguing the valuations are inaccurate. Yet many are still waiting for responses from the Valuation Office Agency, part of HM Revenue & Customs. The average waiting time for appeals is now around 11 months, though some businesses reportedly wait up to 18 months before cases are reviewed.
During that period, companies are still required to pay the higher rates.
For smaller firms, that delay can become more than an administrative frustration. Business groups say the combination of rising tax bills and long appeal waits has contributed to some companies shutting down altogether.
The timing is also adding to wider business anxiety. Rising energy prices linked to the conflict involving Iran have increased operating costs across several industries, while uncertainty in global markets has reportedly pushed many firms to freeze hiring and delay investment plans.
A tax system built for another economy
The deeper concern for economists and business leaders is that Britain’s tax structure may no longer reflect the way the modern economy operates.
Business rates were designed for an economy built around shops, offices and physical commercial activity. But post-pandemic Britain looks very different. Hybrid work has reduced office demand, online retail continues to expand and many newer companies generate substantial revenues without maintaining large physical footprints.
That shift has created an imbalance where businesses rooted in physical space continue carrying a growing share of the tax burden while parts of the digital economy operate far more lightly.
“Property taxes in the UK are the highest by international standards, and the system is designed in a way that continues to increase the yield over time,” Probyn reportedly said. “That creates a clear tension between the need to raise revenue and the need to support investment. That balance has to be addressed.”
The challenge for policymakers is that property taxes remain one of the government’s most stable and reliable revenue sources. Unlike corporation taxes or consumer spending, land and buildings are difficult to move, hide or restructure. At a time of weak economic growth and strained public finances, that reliability has become increasingly valuable for the Treasury.
But critics argue that dependence may now be creating unintended consequences. As more economic activity shifts towards lighter, digital-first business models, the burden increasingly falls on companies still investing in physical Britain — the shops, offices, warehouses and hospitality venues many policymakers say they want to protect.
That leaves the UK facing an uncomfortable balancing act: how to continue raising revenue from property without gradually making investment in the physical economy less attractive.
