BUSINESS TAX GUIDE Business Rates UK - a plain-English explanation for 2026 |
TL;DR
- Business rates (formally non-domestic rates) are a property tax on commercial premises - the business equivalent of council tax on residential property.
- They apply to offices, shops, warehouses, factories, pubs, care homes, car parks, and most other non-residential properties.
- The annual bill = rateable value (set by the VOA) x the multiplier set by central government each April.
- The 2025/26 small business multiplier is 49.9p per pound of rateable value; the standard multiplier is 54.6p.
- Several reliefs reduce or eliminate the charge for small businesses, charities, retail properties, and other qualifying categories.
Last reviewed: June 2026
KEY FACTS | |
| What business rates are | A property tax on non-domestic (commercial) properties - the business equivalent of council tax |
| Who pays | The occupier of the property as ratepayer; the owner after a 3-month void period if the property is empty |
| How calculated | Rateable Value x Multiplier = annual charge before reliefs |
| Small business multiplier 2025/26 | 49.9 pence per pound of rateable value (properties with RV below GBP 51,000) |
| Standard multiplier 2025/26 | 54.6 pence per pound of rateable value (properties with RV GBP 51,000 and above) |
| Who sets rateable values | The Valuation Office Agency (VOA), an executive agency of HMRC, for England and Wales |
What Are Business Rates?
Business rates - formally non-domestic rates (NDR) - are a property tax levied on the occupiers of most non-residential properties in the UK. They are the commercial equivalent of council tax, which applies to residential property. Business rates are one of the oldest forms of property taxation in England, with historical roots in the Poor Law Rating Act 1601 and the Elizabethan rating system, developed into their modern form through the General Rate Act 1967 and the Local Government Finance Act 1988, which remains the primary governing legislation.
In England, business rates revenue is collected by local billing authorities but pooled centrally and redistributed to local authorities through the local government finance settlement. In Wales and Scotland, business rates are devolved matters administered under separate legislation. In Northern Ireland they are administered by Land and Property Services. Business rates raise approximately GBP 25 billion per year in England, making them one of the most significant property taxes in the UK economy.
KEY FACTS
|
Which Properties Are Subject to Business Rates?
Business rates apply to the occupation of most non-residential properties in England, including:
- Offices, shops, and retail units of all sizes
- Warehouses, factories, and industrial units
- Hotels, pubs, restaurants, cafes, and takeaways
- Care homes, hospitals, and private health facilities
- Car parks and petrol stations
- Sports and leisure facilities including gyms, golf courses, and sports stadia
- Advertising hoardings
Exempt properties include: agricultural land and buildings (Schedule 5 of the Local Government Finance Act 1988); places of public religious worship; fish farms; and properties used for the welfare of disabled people. Properties with a rateable value that falls within the 100% SBRR band are also effectively exempt from payment, though they remain in the rating list.
How Are Business Rates Calculated?
The annual business rates charge is calculated as:
Annual charge = Rateable Value x Multiplier
The rateable value is the VOA estimate of the open market annual rental value of the property at the antecedent valuation date. For the current 2023 rating list, this is 1 April 2021. It is a statutory estimate of market rent at that date - not necessarily the rent actually being paid today.
The multiplier is set by central government each April. For 2025/26:
- Small business multiplier: 49.9p per pound of rateable value. Applies to properties with RV below GBP 51,000.
- Standard multiplier: 54.6p per pound. Applies to properties with RV of GBP 51,000 or above.
Worked examples for 2025/26:
- Shop with RV GBP 10,000: GBP 10,000 x 0.499 = GBP 4,990 before reliefs.
- Office with RV GBP 30,000: GBP 30,000 x 0.499 = GBP 14,970 before reliefs.
- Warehouse with RV GBP 80,000: GBP 80,000 x 0.546 = GBP 43,680 before reliefs (standard multiplier applies).
Business Rates Reliefs Available in 2025/26
Several reliefs reduce the business rates bill:
- Small Business Rates Relief (SBRR): 100% for properties with RV at or below GBP 12,000; tapered on a sliding scale up to GBP 15,000. Administered by local billing authorities.
- Retail, Hospitality and Leisure (RHL) relief: 40% discount on the bill for qualifying retail, hospitality, and leisure properties in England in 2025/26, capped at GBP 110,000 per business across all properties.
- Charitable relief: 80% mandatory relief for charities using the property wholly or mainly for charitable purposes. Discretionary relief of up to 20% additional may be granted by the billing authority.
- Empty property relief: 100% for the first 3 months (6 months for industrial properties). After that the full charge applies to the property owner.
- Enterprise zones: 100% relief for up to 5 years for businesses locating in designated enterprise zones.
- Hardship relief: Billing authorities have discretionary powers to grant hardship relief in individual cases.
How to Challenge Your Rateable Value
If you believe your rateable value is too high, use the Check, Challenge, Appeal (CCA) process at gov.uk/correct-your-business-rates:
- Check: Confirm that the details held by the VOA (size, layout, use class) are accurate. Many rateable values are incorrect because the VOA holds wrong property information.
- Challenge: If details are correct but the value is too high, submit a formal challenge with evidence - comparable rental transactions for similar properties at the antecedent valuation date.
- Appeal: If the VOA does not agree to reduce the value, refer the case to the independent Valuation Tribunal for England (VTE) for a binding determination.
A successful challenge resulting in a reduced rateable value will be applied from the effective date, potentially generating a repayment of overpaid rates for prior years in the rating period.
Related Guides |
Disclaimer: This guide is for general information only. Kael Tripton Ltd is not authorised or regulated by the FCA. Always verify details with an FCA-authorised insurer or broker before purchasing. |
Frequently Asked Questions
Are business rates and council tax the same thing?
No. Council tax is levied on residential dwelling occupiers and is based on property valuation band. Business rates are levied on non-residential property occupiers and are calculated on rateable value multiplied by a nationally set multiplier. They are separate taxes governed by different legislation, though both are collected by local billing authorities.
If I rent commercial premises, do I pay business rates?
Yes, in almost all cases. Business rates are levied on the occupier, not the owner. If you are in occupation of rented commercial premises, you are the ratepayer and responsible for the rates bill. Some leases include business rates in the rent (gross/inclusive leases); most standard commercial leases (FRI and similar) do not. Check your lease carefully.
What happens to business rates when commercial property is empty?
Vacant commercial properties receive 100% business rates relief for the first 3 months (6 months for industrial properties). After the void relief period expires, the full business rates charge applies to the property owner. This is intended to incentivise owners to bring empty properties back into occupation.
How do I find my business rates bill?
Use gov.uk/find-business-rates to look up the rateable value of any non-domestic property in England and Wales. Multiply the rateable value by 0.499 (small business multiplier) or 0.546 (standard multiplier) to estimate the gross annual charge before reliefs. Then check whether SBRR, RHL relief, or other reliefs apply.
Are business rates deductible as a business expense for tax?
Yes. Business rates paid on property used wholly for business purposes are an allowable deduction against trading profits for both income tax (self-employed and partnerships) and corporation tax (companies). They are treated as a revenue expense in the period to which they relate.
Sources |
