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The Valuation Office Agency has made some changes that will raise costs across coworking and serviced offices. Entire buildings will be taxed as one unit, which removes access to Small Business Rates Relief for individual occupiers.

Research by ChamberlainWalker Economics estimates an extra 拢600m a year across the sector. The same study says each small business may face more than 拢5,000 in extra yearly costs.

Chris Walker, author of the report, said, 鈥淭he report shows that changing assessments for serviced offices is not a marginal or technical adjustment, but a material cost to a part of the economy that disproportionately supports small high growth firms and local high street ecosystems. This seems entirely at odds with the government鈥檚 economic growth objectives. It is just about the most damaging way I can think of for a government to raise what would be a modest amount of revenue.鈥�

How Are Coworking Operators Reacting?

Operators are preparing for higher tax bills that will pass through to tenants. Desk rates and office rents are expected to increase as operators try to cover the added cost.

Richard Johnson from UBC described what he hears from tenants every day. He said, 鈥淚 talk to our tenants every day and I know just how hard they鈥檙e working to keep their heads above water. These are local entrepreneurs and small teams, not big corporations with deep pockets.鈥�

He added, 鈥淓xpecting a small business to suddenly find an extra 拢5,400 a year just to keep their office door open is completely unrealistic. If this isn鈥檛 fixed, we are just going to see empty desks, we are going to see people forced back to their kitchen tables because they simply can鈥檛 afford to be here anymore.鈥�

Empty desks bring hard decisions for operators, including closing sites that no longer cover their costs.

What Does This Mean For Small Businesses?

Small companies use coworking spaces because entry costs stay low and contracts stay flexible. Higher rates remove that advantage and make shared offices harder to afford.

The report says up to 150,000 workers could leave shared offices and work from home. That outcome follows simple maths when costs rise beyond what smaller teams can pay.

Tina McKenzie from the Federation of Small Businesses said, 鈥淭hese changes will be a major blow for thousands of small businesses and self-employed people based in shared workspaces, effectively stripping away their crucial Small Business Rates Relief just as the cost of doing business is soaring.鈥�

She added, 鈥淪o many startuups chose to work in places like this, building their business while avoiding the prohibitive costs of a building of their own.鈥�

Joe Phelan, money.co.uk business savings expert, said, 鈥淏y treating coworking spaces as a single taxable entity, these reforms risk shifting a significant cost burden onto the small businesses that use them. For freelancers and small teams, even modest increases in fees can have an outsized impact. Many are already operating on tight margins, so this would likely have a direct hit to cash flow.

鈥�Coworking spaces have filled an important gap, giving businesses and entrepreneurs flexibility without having to commit to a long-term lease. If rising costs start to erode that advantage, some may be forced to scale back or reconsider whether these spaces remain viable.

鈥淎nd there鈥檚 also a wider local impact to consider. These hubs drive regular footfall to nearby caf茅s, shops and services, so if businesses are priced out, the effect won鈥檛 be contained to the workspace itself.

鈥淎nyone relying on coworking should check in with their provider and factor potential fee increases into their financial planning before costs begin to rise.鈥�

What About High Streets And Local Activity?

Coworking sites bring daily foot traffic into nearby shops, cafes and services. The study estimates up to 拢260m a year could disappear from high street spending if workers leave these spaces.

The National Enterprise Network said many workspace providers operate as community organisations that support start ups and local jobs.

Chairman Alex Till said, 鈥淟et us be clear: this is not about large commercial landlords. These changes risk penalising community-based organisations that reinvest every pound they generate into local jobs, enterprise and opportunity.鈥�

He added, 鈥淵ou cannot tax community enterprise infrastructure out of existence and then ask why growth has stalled.鈥�

Will The Government Respond?

Workspace operators have already held meetings with ministers and sent letters asking for action. No resolution has been announced.

Jane Sartin from FlexSA said, 鈥淲orkspace operators have repeatedly warned the VOA that changes to business rates assessment were already creating serious risks for flexible workspaces and the small businesses that rely on them. The VOA has gone completely rogue. We urgently need the Treasury to intervene against a backwards and harmful tax hike that they never signed on to. This report now shows just how significant the risks are.鈥�

She added, 鈥淲hat looks like a technical change could cause irreparable damage to the sector, with major consequences for jobs, growth and local economies.鈥�