As we cross the threshold of February 2026, the UK property market is navigating a complex "wait-and-see" period. While the
Bank of England recently held the base rate at 3.75% amid stubborn service-sector inflation, savvy investors are looking past the headline rates toward a specific fiscal shock: the
April 1st, 2026, Business Rates Revaluation.
For those holding mixed-use or "semi-commercial" assets—typically residential flats situated above retail or office units the coming months represent a critical arbitrage window. The 2026 revaluation isn't just a routine adjustment of Rateable Values (RV); it marks the introduction of a permanent
multi-tier multiplier system that will fundamentally decouple the performance of retail-heavy portfolios from the broader commercial sector.
The 2026 Multiplier Split Explained
From April 2026, the government is moving away from the binary small/standard multiplier system. Instead, five distinct multipliers will apply. For semi-commercial investors, the most significant shift is the introduction of lower multipliers for
Retail, Hospitality, and Leisure (RHL) properties with an RV below £500,000.
These "RHL Multipliers" (set at 38.2p for small and 43.0p for standard) are designed to replace temporary relief schemes with long-term certainty. However, this discount is funded by a new
"High-Value Multiplier" of 50.8p for larger properties. If your mixed-use asset sits in a prime location where the commercial element's RV exceeds the £500,000 threshold, your overheads are about to climb significantly. This is a primary driver behind the current pivot toward semi-commercial yields as investors seek to balance these new fiscal weights.
Yield Compression in Retail-Heavy Portfolios
The 2026 revaluation is based on rental values from April 2024. In many secondary high streets, those values were still suppressed, meaning some landlords may see a drop in their RV. Conversely, in dominant hubs,
Savills reports that vacancy rates are at cyclical lows, driving rental growth that will lead to higher rate bills.
This creates a "Yield Compression" effect. As business rates rise, the net effective income for the landlord—especially those on "inclusive" rent deals—is squeezed. When applying for
commercial property mortgages in 2026, lenders are now stress-testing the post-April 2026 rate liability. If your debt-service coverage was already tight, this revaluation could be the factor that triggers a down-valuation during a remortgage.
Strategic Analysis: The 2026 "Rating Shock" Friction Point
The "Hidden Friction" for 2026 semi-commercial lending is the
Transitional Relief Supplement. To fund the phasing-in of higher bills for some, a
1p supplement will be added to the multiplier for many ratepayers for the 2026/27 tax year.
Underwriters are currently struggling with how to treat this "one-year surcharge" in long-term affordability models. Most conservative lenders are "permanentizing" the higher cost in their ICR (Interest Cover Ratio) calculations. For
Portfolio Landlords, this means that a property that was comfortably "in-covenant" in 2025 might suddenly look over-leveraged in 2026, simply due to the change in the multiplier.
Sector-Specific Analysis: The Mixed-Use Impact
1. Portfolio Landlords
Landlords with mixed-use clusters are increasingly using
portfolio mortgages to "blend" the higher RHL-relief benefits of smaller units against the increased costs of larger ones. The goal is to maintain a global ICR that satisfies 2026's tighter lending standards.
2. HNW Individuals
High-Net-Worth buyers are targeting "Trophy" semi-commercial assets in
Prime Central London. However, with the new 50.8p high-value multiplier, the cost of carry is rising. HNWIs are increasingly looking at Private Bank lending that allows for more flexible "Interest-Only" structures to preserve cash flow against the rising tax burden.
3. Complex Income Earners
For developers converting ground-floor retail to residential (PD), the 2026 revaluation creates a window. By reducing the commercial footprint before the April deadline, you can potentially "re-rate" the building at a lower RV. Securing
refurbishment loans
early is essential to ensure the physical works are documented before the Valuation Office Agency (VOA) finalizes the 2026 list.
Re-rating Your Net Effective Income
The ultimate 2026 arbitrage play is to "value-engineer" the commercial element of a mixed-use site. By using short-term property finance to repurpose ground-floor space into smaller, "incubator" style units, landlords can often qualify for the lower 38.2p Small Business RHL multiplier across multiple units, rather than paying the 48p or 50.8p standard rates on a single large floorplate.
Where Most Borrowers Inadvertently Go Wrong in 2026
Many borrowers assume their current mixed-use finance will remain stable upon renewal. In reality, lenders are now requiring a "Draft 2026 Rating Estimate" as part of the valuation process. If you haven't checked your property on the VOA's
Find a Business Rates Valuation
service, you are flying blind. At this stage, most successful borrowers involve a specialist like Willow Private Finance to sense-check the case before it reaches another credit committee.
Frequently Asked Questions
What is the new "Standard RHL Multiplier" for 2026?
For retail, hospitality, and leisure properties with a rateable value between £51,000 and £499,999, the new multiplier is 43.0p. This is significantly lower than the standard non-RHL multiplier of 48.0p. This split is part of the government's 2026 reform to support the high street.
How do I find my future 2026 rateable value?
The Valuation Office Agency (VOA) has published the draft 2026 rating list. You can check your property's estimated 2026 valuation and compare it with current values on the official
GOV.UK Find a Business Rates Valuation service. This is an essential step for any 2026 property finance application.
Can I use a residential mortgage for a mixed-use property?
No. Even if the property is 80% residential, most lenders require a specialist semi-commercial or commercial mortgage. This is because the valuation and risk profile are tied to the commercial lease and the business rates environment, which residential underwriters are not equipped to assess.
Does the 2026 revaluation affect VAT on my purchase?
The revaluation affects the business rates (tax on occupation), not the VAT on the purchase price. However, an increase in Rateable Value can indicate a rising "Market Value," which might increase the total VAT payable if the building has been "Opted to Tax."
What is "Transitional Relief" in the 2026 context?
If your rateable value increases significantly in April 2026, the government phases in the higher bill over three years. This phases the shock to your cash flow, and lenders will take this phased increase into account when stress-testing your property's yield.
How Willow Private Finance Can Help
At Willow Private Finance, we don't just secure debt; we architect the capital stack to withstand fiscal volatility. The 2026 revaluation is a hurdle, but with the right leverage, it is also an opportunity for arbitrage.
- Yield Sensitivity Modeling: We work with specialists to project your post-April 2026 net income, ensuring your remortgage strategy remains viable.
- Specialist Refurbishment Debt: We can arrange bridge-to-term facilities that provide the capital needed to repurpose commercial space, maximizing your eligibility for the new lower RHL multipliers.
- Whole-of-Market Access: From private banks to specialist commercial lenders, we find the partners who truly understand mixed-use estates.
The April 2026 revaluation will redefine the profitability of mixed-use assets. Contact Willow Private Finance today to ensure your portfolio is hedged, funded, and ready for the shift.
