Flexible office operators in the UK are facing rising costs after changes to how business rates are calculated, according to BisNow.
The issue centers on how serviced offices are assessed by the Valuation Office Agency. Increasingly, flexible workspaces are being treated as single properties rather than multiple smaller units.
This change removes a key advantage operators previously relied onโspreading tax liability across individual tenants, sometimes down to desks. With entire buildings now assessed as one unit, rateable values rise, pushing operators into higher tax brackets.
A higher multiplier is also adding to the burden, increasing from 48p to 50.8p, with an additional temporary levy applied on top.
Growth and Smaller Operators at Risk
The impact is expected to be uneven but significant. Smaller operators and regional locations are likely to feel the greatest pressure, with some already slowing expansion plans.
For many businesses using flexible spaceโespecially startups and small firmsโhigher costs may be difficult to absorb. Operators face a difficult decision between raising prices or absorbing the increase themselves.
Wider Market Effects Emerging
The changes come alongside a broader revaluation in 2026, reflecting rising office values in parts of the UK. Buildings with rateable values above ยฃ500,000 will face an additional premium, further increasing liabilities.
Some operators are now reconsidering how they structure their businesses, including setting up individual locations as separate legal entities to manage risk.
Industry Pushback Builds
The Flexible Space Association is pushing back against the reforms, arguing that flexible workspaces function as multi-tenant environments rather than single offices.
Concerns are also growing over backdated tax bills, which in some cases could reach hundreds of thousands of pounds.
Despite industry pressure, there is little indication the government will reverse course, as it looks to increase tax revenues.
