How To Calculate Business Rates

Estimate your business rates based on property value, location, and relief eligibility

Comprehensive Guide: How to Calculate Business Rates in 2024

Business rates (also known as non-domestic rates) are a tax on commercial properties that fund local services. Understanding how to calculate business rates is essential for business owners, property managers, and accountants to budget effectively and ensure compliance with HMRC regulations.

Key Components

• Rateable Value: Assessed by the Valuation Office Agency (VOA)
• Multiplier: Set by government (standard or small business)
• Reliefs: Reductions available for eligible businesses
• Revaluations: Typically every 3-5 years (2023 revaluation in effect)

2024 Multipliers

• England: 51.2p (standard), 49.9p (small business)
• Wales: 53.5p (standard), 52.2p (small business)
• Scotland: 49.8p (standard), 48.4p (small business)

Step-by-Step Calculation Process

1. Determine Your Rateable Value

   This is the open market rental value of your property as assessed by the VOA on a specific date (currently 1 April 2021 for the 2023 revaluation). You can find your property’s rateable value on the GOV.UK business rates service.

2. Identify the Correct Multiplier

   The multiplier (or ‘pence in the pound’) is set annually by the government. For 2024/25:

   Location	Standard Multiplier	Small Business Multiplier
   England	0.512	0.499
   Wales	0.535	0.522
   Scotland	0.498	0.484

3. Calculate the Basic Rate

   Multiply your rateable value by the appropriate multiplier:

   Basic Rate = Rateable Value × Multiplier

   Example: A shop in England with RV £20,000 would calculate as: £20,000 × 0.499 = £9,980 annual rate before reliefs.

4. Apply Available Reliefs

   Several relief schemes can reduce your bill:

   • Small Business Rate Relief: Available if your property’s rateable value is below £15,000 (100% relief for RV ≤ £12,000, tapering to 0% at £15,000)
   • Rural Rate Relief: Up to 100% relief for businesses in rural areas with population ≤ 3,000
   • Retail, Hospitality and Leisure Relief: 75% relief up to £110,000 per business for 2024/25
   • Transitional Relief: Phases in large increases/decreases over several years
   • Charitable Relief: Up to 80% relief for registered charities
5. Calculate Final Amount

   Subtract any reliefs from the basic rate to get your final annual bill. This is typically payable in 10 or 12 monthly instalments.

Common Mistakes to Avoid

• Using outdated rateable values: Always check the current valuation on the VOA website
• Missing relief deadlines: Some reliefs require annual reapplication
• Incorrect property classification: Ensure your property is classified correctly (e.g., retail vs office)
• Ignoring transitional arrangements: Large changes are phased in over several years
• Not appealing incorrect valuations: You can challenge your rateable value if you believe it’s wrong

Business Rates vs Other Property Taxes

Tax Type	Applies To	Calculated By	Typical Rate
Business Rates	Non-domestic properties	Rateable Value × Multiplier	~45-55% of RV
Council Tax	Domestic properties	Property band × local authority rate	£1,500-£3,500/year
Stamp Duty Land Tax	Property purchases over £150k (commercial)	Percentage of purchase price	2-5% for commercial
VAT on Property	New commercial buildings	Standard VAT rules	20% (if applicable)

Recent Changes and Future Outlook

The 2023 revaluation came into effect on 1 April 2023, based on property values as of 1 April 2021. Key changes include:

• More frequent revaluations (every 3 years instead of 5)
• New “improvement relief” to encourage property upgrades
• Extended transitional relief scheme
• Freeze on the small business multiplier for another year

Looking ahead, the government has announced plans to:

• Introduce a new “business rates improvement relief” from 2024
• Explore alternatives to the current system, including potential sales tax replacements
• Increase digitalisation of the valuation and appeals process

Expert Tips for Reducing Your Business Rates

1. Check for Exemptions

   Some properties are exempt from business rates, including:

   • Empty properties (for first 3 months, 6 months for industrial)
   • Properties used for training or welfare of disabled people
   • Buildings used for religious worship
   • Public parks and certain agricultural buildings
2. Optimise Your Property Use

   Consider whether your property could be classified differently to qualify for additional reliefs. For example:

   • Converting part of a retail space to office use might qualify for different reliefs
   • Adding renewable energy installations may qualify for green energy reliefs
   • Creating shared workspaces might change your rateable value classification
3. Challenge Your Valuation

   If you believe your rateable value is incorrect, you can:

   1. Check comparable properties in your area
   2. Gather evidence of rental values
   3. Submit a “Check” challenge via the VOA website
   4. Consider hiring a rating surveyor for complex cases

   Note that the appeals process changed in 2017 – you must now go through a “Check, Challenge, Appeal” system.

4. Time Your Property Changes

   Strategic timing of property improvements or moves can help manage rate costs:

   • Complete major improvements just after a revaluation to maximise time before next assessment
   • Consider temporary closures during empty property relief periods
   • Plan expansions to qualify for small business relief thresholds
5. Explore Alternative Reliefs

   Less well-known relief schemes include:

   • Enterprise Zone Relief: Up to 100% relief for 5 years in designated zones
   • New Build Empty Property Relief: 18 months relief for newly built commercial properties
   • Partially Occupied Property Relief: Temporary relief for parts of properties not in use
   • Hardship Relief: Discretionary relief for businesses facing financial hardship

Regional Variations and Considerations

While the fundamental system is similar across the UK, there are important regional differences:

England

• Administered by local councils
• 2023 revaluation showed average 7.1% increase in rateable values
• Retail, Hospitality and Leisure Relief extended to 2024/25 at 75%
• New “improvement relief” from April 2024

Wales

• Administered by the Welsh Revenue Authority
• Higher multipliers than England (0.535 standard)
• Retail relief at 50% (lower than England)
• Different transitional relief arrangements

Scotland

• Administered by local councils but set by Scottish Government
• Lower multipliers than England and Wales
• Small Business Bonus Scheme (SBBS) provides 100% relief for properties up to £18,000 RV
• Different revaluation cycle (2023 revaluation based on 2022 values)

Business Rates and Commercial Leases

When negotiating commercial leases, business rates are a crucial consideration:

• Tenants vs Landlords: Typically the tenant’s responsibility unless otherwise agreed
• Lease Clauses: Look for “rates clauses” specifying who pays and how increases are handled
• Break Clauses: Consider rate liabilities when exercising break options
• Service Charges: Ensure rates aren’t being incorrectly included in service charge calculations

The Royal Institution of Chartered Surveyors (RICS) provides guidance on how business rates should be handled in lease negotiations.

Digital Tools and Resources

Several official tools can help with business rates calculations and management:

• GOV.UK Business Rates Service: Find and check your business rates
• VOA Valuation Search: Search for rateable values
• Scottish Assessors Portal: Scottish property assessments
• Welsh Revenue Authority: Welsh rates information
• RICS Business Rates Advice: Professional valuation guidance

Case Study: Calculating Rates for a London Retail Shop

Let’s work through a practical example for a retail shop in central London:

• Property Details: High street retail unit, 1,200 sq ft
• Rateable Value: £45,000 (as of 2023 revaluation)
• Location: Westminster, London (England)
• Eligibility: Qualifies for Retail, Hospitality and Leisure Relief

Step 1: Basic Calculation

£45,000 (RV) × 0.499 (small business multiplier) = £22,455 basic annual rate

Step 2: Apply Retail Relief (75%)

£22,455 × 0.75 = £16,841.25 relief

Step 3: Final Calculation

£22,455 – £16,841.25 = £5,613.75 annual business rates

Monthly payment: £5,613.75 ÷ 12 = £467.81

Important Note: This example assumes no transitional relief is applicable. In practice, large changes are phased in over several years through transitional arrangements.

Frequently Asked Questions

Q: How often are business rates revalued?

A: Since 2023, revaluations occur every 3 years (previously every 5 years). The next revaluation will be in 2026 based on 2024 property values.

Q: Can I pay my business rates in instalments?

A: Yes, most councils offer 10 or 12 monthly instalments. You can usually choose your payment date (1st or 15th of the month).

Q: What happens if I don’t pay my business rates?

A: Non-payment can lead to:

• Reminder notices and late payment charges
• Court action and liability orders
• Enforcement by bailiffs
• Bankruptcy proceedings for persistent non-payment

If you’re struggling to pay, contact your local council immediately to discuss payment plans.

Q: Are business rates tax deductible?

A: Yes, business rates are considered an allowable expense for corporation tax or income tax purposes.

Q: How do I appeal my business rates?

A: The process is:

1. Check your rateable value is correct via the VOA website
2. If you believe it’s wrong, submit a “Check” request
3. If the VOA agrees there may be an error, you can then “Challenge” the valuation
4. If unresolved, you can appeal to the Valuation Tribunal

Note that you must continue paying your rates during the appeal process.

Glossary of Key Terms

• Rateable Value (RV): The open market rental value of a property
• Multiplier: The pence in the pound figure set by government
• Uniform Business Rate (UBR): The standard multiplier
• Small Business Multiplier: Lower multiplier for eligible properties
• Revaluation: Periodic reassessment of all rateable values

• VOA: Valuation Office Agency – the government body that values properties
• Transitional Relief: Phases in large changes to rate bills
• Empty Property Relief: Temporary exemption for unoccupied properties
• Material Change of Circumstance: A change that might affect rateable value
• Check, Challenge, Appeal: The current appeal process

Final Thoughts and Professional Advice

Business rates represent a significant overhead for many businesses, but understanding the system can help you:

• Budget more accurately for this fixed cost
• Identify all reliefs you’re eligible for
• Challenge incorrect valuations
• Plan property decisions more strategically

For complex situations, consider consulting:

• A rating surveyor for valuation disputes
• An accountant for tax planning around rates
• A commercial property solicitor for lease negotiations

Remember that business rates are devolved, so the rules differ between England, Wales, Scotland and Northern Ireland. Always check the specific regulations for your property’s location.

For the most authoritative information, consult the GOV.UK business rates guidance or contact your local council’s business rates team.