UK to Hike Taxes on Amazon, Online Giants to Help High Street

The UK Treasury said it plans to raise business rates levied on large distribution warehouses used by online retailers such as Amazon.com Inc. in a move designed to fund lower tax bills for high street shops.

The government will legislate to apply a higher tax rate to properties with a so-called rateable value of more than £500,000 ($650,000) from 2026-27, the Treasury said in a policy document published by the Treasury alongside Chancellor of the Exchequer Rachel Reeves’ budget on Wednesday. 

This “captures the majority of large distribution warehouses, including those used by online giants,” according to the document, which said the move would help fund “sustainably” plans to lower taxes on retail, hospitality and leisure businesses with rateable values below that threshold.

Higher tax bills

The plans to hit the likes of Amazon with higher tax bills — first reported last month by Bloomberg — aim to deliver on Labour’s pre-election promise to “level the playing field” between online firms and bricks-and-mortar stores. Retailers on the high street have long complained that the business rates system — which charges companies a tax bill based on the value of their physical premises — creates an unfair handicap versus their online competitors, which either have a smaller physical footprint, or whose properties are out of town centers, where the rateable value of land is lower.

“The business rates burden falls more heavily on property-intensive sectors,” the Treasury said. “This is why the government wants to ensure that the business rates burden is permanently rebalanced and high street businesses are protected.”

The retail, hospitality and leisure sectors were given an additional boost on Wednesday when Reeves announced temporary relief worth 40% on business rates for 2025-26, avoiding an April cliff edge when a 75% Covid-era relief was due to expire. 

Business rates are a key source of funding for local authorities and are forecast to raise about £26 billion in 2024-25, representing about a quarter of core spending power for councils, according to the Treasury. 

Despite the help on business rates for the high street, the UK’s business community has given Reeves’ budget a mixed reception. Some firms have warned that they will hire fewer people and cut investments because of the Chancellor’s £40 billion package of tax rises and a significant increase to the minimum wage.