Is Wales Ready to Replace Business Rates with a Land Value Tax?
A formal public tender is now live to assess valuation methods, data needs, revenue modelling, and wider impacts — setting the stage for legislation in the next Senedd term.
For ratepayers, this is not just an abstract tax discussion. It's a live policy development that could reshape the property landscape in Wales. Business rates currently raise £1.39 billion in gross revenue across 126,000 properties.
The roots of this shift trace back to the Wales Act 2014, which devolved tax powers to Wales for the first time in centuries. Since April 2015, the Senedd has had legislative authority over non-domestic rates — a key component of local government funding.
Now, with the formal commissioning of technical work to explore LVT, the Welsh Government is signaling that a full-scale property tax transformation is potentially on the table.
A Land Value Tax, in theory, is a charge on the underlying land value — not the buildings or business activities on it. Supporters argue it encourages more efficient land use and is harder to avoid. But for ratepayers, particularly in urban or commercial environments, there are serious practical concerns.
Some of the risks include: Data scarcity in built-up areas, where vacant land values are hard to establish
A disconnect between tax liability and business performance, as land value ignores building use or scale
Difficulties valuing special-use or restricted sites, such as cultural, public, or listed properties
Speculative assessments of development potential, which may not reflect economic reality
No consideration for property age, quality, or utility, treating modern and obsolete buildings the same
Complex ownership structures, raising questions over who would be liable — owner, leaseholder, or occupier
Uncertain fiscal and behavioural outcomes, especially in high-density urban centres where tax burdens could shift unpredictably
Additionally, the biggest issue with LVT is that most people have some idea of what the rent they pay or the purchase price of their property is based upon. But the difference between the value of the property and the land it stands on is a mystery to most. The market for land is not liquid enough to support a sensible comparison-based valuation approach on the scale that is being envisaged — without creating mass confusion.
Proponents often suggest that LVT would create a fairer system, where landowners bear the tax liability instead of occupiers. But this assumption is, frankly, naïve. In practice, all that will happen is that rents and prices will adjust upwards to compensate, passing the burden straight back to tenants and consumers. The notion of shifting liability away from users of property is far more complex than the theory suggests, especially in commercial leasing markets where landlords typically price in all overheads.
Few would argue that the current business rates system is perfect. But rushing to replace it with an untested model, built on speculative land values and complex liability chains, carries major risks. Any new system must deliver on fairness, efficiency, and clarity. Currently, the case for using LVT to replace business rates is unproven — and for the commercial real estate sector, that is deeply concerning.
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