Business Rates Explained
Business rates are a tax on commercial properties in England and Wales. This guide covers how rates are calculated, who is liable, available reliefs, and how to appeal your valuation.
What Are Business Rates?
Business rates (formally known as non-domestic rates) are a property tax levied on most commercial premises. This guide covers England; Wales, Scotland and Northern Ireland have different rates and rules.
Business rates are charged on properties such as shops, offices, factories, warehouses, pubs, and holiday rental properties. The amount payable is based on the rateable value of the property, which is assessed by the Valuation Office Agency (VOA).
Who Pays Business Rates?
The occupier of a non-domestic property is normally responsible for paying business rates. If the property is empty, the owner becomes liable after a short initial exemption period.
Business rates apply to:
- Limited companies occupying commercial premises
- Sole traders and partnerships operating from business properties
- Charities and voluntary organisations (though often at reduced rates)
- Public sector bodies
Home-based businesses do not usually pay business rates unless a distinct part of the property is used exclusively for business. Working from a home office typically does not trigger a business rates liability.
How Business Rates Are Calculated
The annual business rates bill is calculated as:
Rateable Value × Multiplier = Basic Business Rates
Rateable Value
The rateable value is an estimate of the annual rent a property could achieve on the open market at a specific valuation date. The current revaluation took effect on 1 April 2026 and uses rental values at 1 April 2024.
The Multiplier
The multiplier (also called the poundage) is set annually by the government. England has five multipliers for 2026/27:
| Multiplier | Rate | Applies to rateable value and property type |
|---|---|---|
| Small business RHL | 38.2p | Qualifying retail, hospitality and leisure below £51,000 |
| Small business | 43.2p | Other properties below £51,000 |
| Standard RHL | 43p | Qualifying retail, hospitality and leisure from £51,000 to £499,999 |
| Standard | 48p | Other properties from £51,000 to £499,999 |
| High-value | 50.8p | Properties with a rateable value of £500,000 or more |
Calculation Example
| Element | Value |
|---|---|
| Rateable value | £25,000 |
| Multiplier (small business, non-RHL) | 43.2p |
| Annual business rates | £10,800 |
This is the starting figure before any reliefs are applied.
Business Rates Reliefs
Several reliefs can significantly reduce or eliminate a business rates bill.
Small Business Rate Relief (SBRR)
The most common relief for small businesses:
| Rateable Value | Relief |
|---|---|
| Up to £12,000 | 100% relief (no rates payable) |
| £12,001 to £15,000 | Tapered relief from 100% to 0% |
| Above £15,000 | No SBRR (but small business multiplier applies up to £51,000) |
To qualify, the property must be your only business property (or your only one in England). If you occupy additional properties, relief may be lost.
Retail, Hospitality and Leisure Multipliers
The temporary retail, hospitality and leisure relief ended on 31 March 2026. From April 2026, qualifying occupied properties with a rateable value below £500,000 use one of the lower RHL multipliers shown above. Eligibility depends on how the property is used. Pubs and live music venues may also receive separate relief in 2026/27.
Charitable Rate Relief
Charities and community amateur sports clubs receive mandatory 80% relief on properties used wholly or mainly for charitable purposes. Local authorities can grant an additional discretionary 20% relief to make the premises entirely exempt.
Empty Property Relief
Empty commercial properties are exempt from business rates for the first 3 months (or 6 months for industrial properties). After this period, full rates are payable. Exceptions include:
- Properties with a rateable value below £2,900
- Listed buildings
- Properties where the owner is in administration or liquidation
Rural Rate Relief
Businesses in rural settlements with a population below 3,000 can receive 100% rural rate relief if they are:
- The only general store or post office with a rateable value up to £8,500
- The only pub or petrol station with a rateable value up to £12,500
Hardship Relief
Local authorities have discretion to grant hardship relief of up to 100% if a business would suffer hardship without it and granting relief is in the interests of the local community.
Transitional Relief
When rateable values change after a revaluation, transitional relief limits how much bills can increase or decrease in a single year. This smooths out sudden jumps in liability. The transitional arrangements apply over the life of the rating list, gradually moving bills towards their full level.
Business Rates and Your Accounts
Business rates are a tax-deductible expense for both corporation tax and income tax purposes. They should be recorded as an overhead in your accounting records .
Business rates are not subject to VAT — they are a direct tax levied by the local authority, not a supply of goods or services.
How to Pay
Business rates bills are usually issued in February or March for the coming financial year (April to March). Payment options include:
- Monthly instalments — 10 or 12 monthly direct debits
- Annual payment — a single payment at the start of the year
- Online payment — through the local authority website
- Bank transfer — to the council’s business rates account
Challenging Your Rateable Value
If you believe your rateable value is too high, you can challenge it through the Check, Challenge, Appeal process:
Step 1: Check
Verify the details the VOA holds about your property. If the facts are wrong (for example, floor area or facilities), submit a Check to have them corrected.
Step 2: Challenge
If the Check does not resolve the issue, submit a formal Challenge explaining why you believe the rateable value is wrong. You need to provide evidence such as comparable rental values for similar properties.
Step 3: Appeal
If the Challenge is unsuccessful, you can Appeal to the independent Valuation Tribunal. This is a formal hearing where both sides present evidence.
The process can take 12 to 18 months or longer. While a challenge is ongoing, you must continue paying your current bill. If successful, you receive a backdated refund.
Business Rates and Property Changes
Certain events require you to notify the VOA or your local authority:
- Moving into or vacating a property
- Splitting a property into separate units or merging units together
- Physical changes such as extensions, renovations, or demolitions
- Change of use from one type of business to another
The VOA may alter the rateable value to reflect material changes, and the local authority needs to know who is liable for the rates.
Interaction with Other Taxes
Business rates operate independently from other taxes. However, they interact with the broader tax position:
- Rates paid are deductible against profits for corporation tax or income tax
- Rates are outside the scope of VAT and do not appear on VAT returns
- Properties subject to business rates are not subject to council tax (and vice versa)
- Making Tax Digital requirements do not apply to business rates directly, but the expense must be recorded digitally in your accounting software