The UK Treasury said it plans to raise business rates levied on large distribution warehouses used by online retailers such as Amazon.com Inc. in a move designed to fund lower tax bills for high street shops.

The government will legislate to apply a higher tax rate to properties with a so-called rateable value of more than GBP500,000 ($650,000) from 2026-27, the Treasury said in a policy document published by the Treasury alongside Chancellor of the Exchequer Rachel Reeves’ budget on Wednesday.

This “captures the majority of large distribution warehouses, including those used by online giants,” according to the document, which said the move would help fund “sustainably” plans to lower taxes on retail, hospitality and leisure businesses with rateable values below that threshold.

The plans to hit the likes of Amazon with higher tax bills — first reported last month by Bloomberg — aim to deliver on Labour’s pre-election promise to “level the playing field” between online firms and bricks-and-mortar stores. Retailers on the high street have long complained that the business rates system — which charges companies a tax bill based on the value of their physical premises — creates an unfair handicap versus their online competitors, which either have a smaller physical footprint, or whose properties are out of town centers, where the rateable value of land is lower.

“The business rates burden falls more heavily on property-intensive sectors,” the Treasury said. “This is why the government wants to ensure that the business rates burden is permanently rebalanced and high street businesses are protected.”

The retail, hospitality and leisure sectors were given an additional boost on Wednesday when Reeves announced temporary relief worth 40% on business rates for 2025-26, avoiding an April cliff edge when a 75% Covid-era relief was due to expire.

Business rates are a key source of funding for local authorities and are forecast to raise about GBP26 billion in 2024-25, representing about a quarter of core spending power for councils, according to the Treasury.

Despite the help on business rates for the high street, the UK’s business community has given Reeves’ budget a mixed reception. Some firms have warned that they will hire fewer people and cut investments because of the Chancellor’s GBP40 billion package of tax rises and a significant increase to the minimum wage.

The British Retail Consortium said Reeves had added an extra GBP367 million in costs for firms compared with their pre-budget expectations, while UK Hospitality — which represents pubs and restaurants — said the budget increased the cost to businesses of each full-time employee by at least GBP2,500.

“This is a tough budget for business to swallow,” said Shevaun Haviland, director general of the British Chambers of Commerce, in a statement. “Firms will find it more challenging to invest and recruit in the short-term.”

The focus on online giants isn’t new, with the previous Tory government consulting on introducing an online sales tax, before rejecting the idea. Amazon reported almost $33.6 billion of revenue in the UK last year, or 5.8% of its global total. The company wrote in a blog post in September that it’s one of the UK’s 10 biggest taxpayers, paying GBP932 million in direct taxes to the Exchequer in 2023, as well as collecting and remitting an additional GBP3.4 billion from its customers, employees and other third parties.