Serviced Office Tenants could Face New Business Rates Burden

Thousands of small businesses in serviced and shared offices may lose small business rate relief. Learn what this means for tenants in Manchester and beyond.

A tax change that could reshape shared offices

Flexible workspaces and serviced offices are a cornerstone for small businesses, sole traders and start-ups across Manchester and the UK. They provide affordable, professional environments without the risks of long-term leases. Yet many of these businesses now face unexpected costs after recent changes to business rates relief.

The Valuation Office Agency (VOA) has begun disqualifying tenants in shared offices from Small Business Rate Relief (SBRR). The scheme previously allowed many small firms to pay little or no business rates. Campaigners argue the move risks stifling entrepreneurship and pushing fragile businesses to the brink.

How Small Business Rate Relief (SBRR) works

SBRR reduces the financial burden on small businesses by cutting up to 100% of business rates on eligible properties. 

Until recently, many tenants in serviced offices qualified, with each occupier assessed on their own small unit rather than the building as a whole. For sole traders and microbusinesses, this relief freed up capital to reinvest in growth, staff or innovation.

Why shared offices are now under pressure

The shift stems from a legal ruling that determined individual rooms in barristers’ chambers did not qualify for SBRR. The VOA has extended this principle to serviced offices and shared spaces, changing how occupiers are assessed.

For example, a shared building with a rateable value of £230,000 divided among 20 tenants could assign each business a value of £11,500. Although this sits just below the £12,000 threshold for full relief, the changes mean many could lose eligibility and potentially face bills of around £5,750 annually.

This shift may affect up to 4,000 properties across the UK immediately. Wider reviews in the future are expected to capture more businesses in food halls, co-working sites and market spaces.

The impact on start-ups and sole traders

The Federation of Small Businesses (FSB) has warned that removing this relief could hit around 150,000 small firms and sole traders. An additional £5,000–£6,000 in annual costs for these businesses could mean reducing staff, slowing investment or even closing entirely.

In Manchester, where shared offices are a key part of the city’s entrepreneurial ecosystem, the impact could be severe. Start-ups choose flexible space because it reduces financial risk. Losing this advantage undermines the very purpose of the model.

Calls for reform of the business rates system

Industry voices are urging the Government to review how business rates are applied to shared offices. The FSB argues the current approach unfairly penalises companies using serviced and flexible spaces, even though these are often the most efficient use of commercial property.

A more balanced system could preserve relief for smaller firms while still ensuring fairness across the tax base. Without reform, many fear that growth and innovation will be stifled at the very moment when high streets and local economies need revitalisation.

What business leaders can do now

For business owners and directors, there are several steps worth considering that could make your business more financially resilient at a time of change:

• Review your workspace agreement: Understand how rates are applied and whether SBRR has been factored into pricing.
  
  
• Plan for potential costs: Budget for possible increases to prevent sudden shocks.
  
  
• Seek transparency: Work with serviced office providers who are clear about how rates are handled.
  
  
• Stay informed: The Chancellor’s upcoming Budget could reshape relief again, particularly for retail, hospitality, and flexible office sectors.

Summary for serviced office occupiers

Serviced and shared offices remain one of the most valuable tools for small businesses, providing professional space without the liabilities of a lease. But with the VOA tightening its approach to small business rate relief, occupiers face new financial risks.

For Manchester’s entrepreneurs and start-ups, the challenge now is to choose office solutions that combine flexibility with transparency. Partnering with providers who understand the tax landscape and support tenants through regulatory change will be critical.

The future of shared offices depends on balancing accessibility with sustainability. Businesses must prepare for change — and policymakers must recognise that thriving small firms are essential to the wider economy.

Want advice about how to choose an office space that can mitigate risk and improve the financial resilience of your business? Contact the LEVEL team today for more information!

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