PolicyLens

Liberal Democrats - Business tax

Replace business rates with landowner levy

Replace business rates with a Commercial Landowner Levy on landowners.

Last updated: May 2026.

Read the policy-specific methodology note

Policy baseline

The manifesto proposes replacing business rates with a Commercial Landowner Levy. Fiscal effects depend on rates, valuation and local-government compensation.

  • Tenants gain if burden shifts to landowners.
  • Landowners lose through lower post-tax rents.
  • Revaluation and transition are difficult.

Core trade-offs

The direct beneficiaries are high-street tenants and some firms. The costs fall mainly on commercial landlords and property owners. The main economic question is transition can disrupt local-government finance.

  • High-street tenants and some firms gain most directly.
  • Costs fall mainly on commercial landlords and property owners.
  • Key risk: transition can disrupt local-government finance.

Fiscal impact by 2028-29

-GBP 3.0bn to +GBP 3.0bn. Central estimate: +GBP 0.0bn.

  • Positive numbers mean net fiscal cost; negative numbers mean Exchequer savings.
  • Main channel is the scored tax, spending or delivery change.
  • Offsets depend on tax receipts, behaviour and pass-through.
  • Range reflects uncertain implementation and economic response.
  • This is not an official costing.

Economic impact by 2028-29

  • Jobs: Little direct job effect; sector-specific taxes can reduce hiring in affected industries.
  • Wages: Legal taxpayers may shift costs to workers, owners or consumers over time.
  • Prices: Some pass-through likely where market power or fixed demand exists.
  • GDP / productivity: Usually mildly negative before spending use; stronger if investment or mobility responses rise.

Assessment

This is a real trade-off, not a free gain. High-street tenants and some firms benefit, while commercial landlords and property owners bear most costs. Overall output depends on behaviour, capacity and pass-through.

Confidence: Medium-low. Higher on the policy target and fiscal channel; lower on behaviour, pass-through and economy-wide effects.

Main risks

  • Behavioural response: Avoidance, timing and relocation can reduce receipts.
  • Incidence uncertainty: Legal taxpayers may shift costs to workers, consumers or investors.
  • Investment risk: Higher taxes can reduce investment where returns are mobile.

Safeguards

  • Use HMRC microsimulation before legislating.
  • Close avoidance routes before rate rises.
  • Review receipts and investment annually.

Academic evidence

Mirrlees and review team, Institute for Fiscal Studies, 2011

Tax by Design

Efficient tax systems should avoid narrow bases and poorly targeted reliefs that distort decisions.

Useful benchmark for judging tax-base changes and exemptions.

Tax by Design (2011)

Kotlikoff and Summers, Handbook of Public Economics, 1987

Tax incidence

The legal payer of a tax is not necessarily the person bearing its economic burden.

Supports incidence discussion across taxes.

Tax Incidence (1987)

UK government evidence

Sources

Other Liberal Democrats policies

PolicyLens estimates are illustrative and should not be treated as official costings.