What new business rates guidance means for pubs

For many publicans, business rates are one of the most confusing – and costly – aspects of running a pub.

That’s why the recent publication of the Valuation Office Agency's (VOA) 2026 guidance for licensed premises is significant news.

The move provides welcome transparency on how pubs are assessed for business rates and arrives at a time when operators are grappling with rising costs, staffing pressures and tighter margins.

And the stakes are high.

Analysis shows that pubs across Tyne and Wear have experienced significant increases in rateable values, with some venues seeing rises of more than 100 per cent compared with the previous list.

While relief measures are available, including the recently introduced 15 per cent Pubs and Live Music Venues Rates Relief, understanding how your valuation has been calculated has never been more important.

Unlike many commercial properties, pubs are not valued primarily by comparing rents on similar premises.

Instead, the VOA uses a trading-based approach that attempts to reflect the income a pub could reasonably generate.

The starting point is something known as Fair Maintainable Trade (FMT), which is the level of turnover a reasonably efficient operator could be expected to achieve from the property.

Importantly, the VOA doesn’t simply look at your most recent year’s accounts.

Valuers typically consider trading performance over a number of years and assess what represents a sustainable level of trade, rather than a short-term peak or trough.

Once FMT has been established, turnover is divided into different income streams, including drink sales, food sales and accommodation income.

Each income stream is then assigned a valuation percentage that reflects its profitability and operating costs.

Food-led pubs, for example, generally attract lower percentages than wet-led venues because food operations tend to be more expensive to run.

The figures are then combined to produce the final rateable value used to calculate business rates liability.

The guidance recognises not all pubs operate in the same market.

Different valuation inputs apply depending on the pub's location alongside operational characteristics such as competition, customer demand, layout and trading mix.

Recent data from Tyne and Wear highlights just how varied outcomes can be.

Newcastle city centre venues, destination pubs and large food-led operators have generally seen significant increases in rateable values, while some smaller community pubs have experienced even steeper percentage rises from previously low assessments.

One positive aspect of the 2026 guidance is that it acknowledges the challenges facing the licensed trade.

Since the pandemic, operators have faced escalating energy bills, higher wage costs and increased food and supply chain expenses.

In response, the VOA has generally reduced valuation percentages to better reflect these pressures.

However, many operators will still question whether valuations fully capture the ongoing squeeze on profitability.

While the VOA's methodology is more transparent than ever, valuations are not purely formulaic.

Professional judgement remains a key part of the process, with valuers considering comparable pubs, local market conditions and whether trading levels are genuinely sustainable.

For publicans, that creates an opportunity to review whether their assessment accurately reflects reality.

Are the FMT assumptions realistic? Have sustainability adjustments been applied appropriately? How does your pub compare with similar venues nearby?

With many pubs facing higher rateable values under the 2026 list, now is a good time to take a closer look.

Greater transparency means operators are better placed than ever to understand and, where necessary, challenge how their business rates assessment has been determined.

Paul Davinson is a business rates partner at property consultancy Knight Frank’s Newcastle office

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