How to Calculate Business Rates in the UK? | A Step-by-Step Guide
Business rates are a crucial financial obligation for companies operating in the UK. They contribute to local services and are based on the rateable value of a business property.
Understanding how to calculate business rates is essential for budgeting and financial planning. The UK government periodically updates the rateable values and multipliers that determine business rates.
In England and Wales, businesses use a specific calculation method based on their property’s valuation and an assigned multiplier. Certain relief schemes also apply, reducing the overall cost for eligible businesses.
This guide will walk you through the essential steps to calculate your business rates, including key concepts like rateable value, multipliers, and available reliefs. We will also cover how to challenge an incorrect valuation and provide real-world examples to simplify the process.
What Are Business Rates?
Business rates are a tax on non-domestic properties in the UK, collected by local councils to fund public services. These rates apply to properties used for commercial purposes, such as shops, offices, warehouses, and factories.
Why Business Rates Matter?
- They provide local councils with essential funding for services like waste collection, road maintenance, and emergency services.
- Businesses must factor them into their operational costs, as they can be a significant financial commitment.
- Understanding business rates helps businesses plan their budgets more effectively and identify potential relief opportunities.
Business rates are calculated based on the rateable value of the property, determined by the Valuation Office Agency (VOA). This value reflects the estimated rental price of the property as of 1 April 2021.
Who Needs to Pay Business Rates in the UK?
Business rates are payable by occupiers of non-domestic properties, including:
- Shops, offices, and retail stores
- Restaurants, pubs, and hotels
- Warehouses and factories
- Clinics and surgeries
- Any other property used for business purposes
Exemptions from Business Rates
Certain types of properties are exempt, including:
- Agricultural land and buildings
- Religious buildings
- Buildings used for charitable purposes
- Properties with low rateable values eligible for Small Business Rate Relief (SBRR)
If you are unsure whether your property is liable for business rates, you can check with the Valuation Office Agency (VOA).
How Is the Rateable Value of a Property Determined?
The rateable value of a property is an estimate of its open market rental value on 1 April 2021. The Valuation Office Agency (VOA) determines this value based on factors such as:
- Location and size of the property
- Type of business conducted on the premises
- Market rental rates for similar properties
How to Check Your Rateable Value?
You can find your property’s rateable value on the official government website or through your local council’s business rates department.
If you believe your valuation is incorrect, you have the right to challenge the assessment. This process involves providing evidence to support your claim and, if necessary, filing an appeal.
What Is the Business Rates Multiplier and How Does It Affect Your Bill?
The multiplier is a figure set annually by the UK government and is used to calculate business rates. It represents the amount of tax payable per pound of rateable value.
Current Business Rates Multipliers (England & Wales)
| Year | Standard Multiplier | Small Business Multiplier |
| 2024-2025 | 54.6p | 49.9p |
| 2023-2024 | 51.2p | 49.9p |
| 2022-2023 | 51.2p | 49.9p |
The standard multiplier applies to properties with a rateable value of £51,000 or more, while the small business multiplier applies to those below this threshold.
How to Calculate Business Rates in the UK?
To calculate business rates, follow these steps:
1. Find the Rateable Value of Your Property
The rateable value is available on the VOA website. This value is based on the estimated rental value of your property as of 1 April 2021.
2. Identify the Correct Multiplier
Check the business rates multiplier for the current financial year. Use:
- The standard multiplier if your property’s rateable value is £51,000 or more
- The small business multiplier if your rateable value is below £51,000
3. Calculate Your Business Rates
Multiply the rateable value by the appropriate multiplier to get your basic business rates bill.
Example Calculation:
Barbara owns a shop in England with a rateable value of £10,000. She uses the 2023-2024 small business multiplier (49.9p) to estimate her business rates:
£10,000 x £0.499 = £4,990 (basic business rates)
4. Deduct Any Applicable Reliefs
If eligible, apply for reliefs such as Small Business Rate Relief or Transitional Relief to reduce the final amount.
How Can You Check and Challenge Your Business Rates Valuation?
In England and Wales, business rates valuations are managed by the Valuation Office Agency (VOA). If a business owner believes their rateable value is incorrect, they have the right to check, challenge, and appeal the valuation.
1. Sign in or Register for a Business Rates Valuation Account
- Visit the VOA website and log in using a Government Gateway user ID.
- If you do not have a Government Gateway account, you will need to create one.
2. Add Your Property to the Account
- Locate your property and verify ownership or occupancy by providing relevant documentation.
- This step allows you to make changes or challenge the rateable value.
3. Check and Update Property Details
- Review the information the VOA holds about your property.
- If there are inaccuracies (e.g., incorrect size, layout, or usage details), submit a Check case to correct them.
4. Challenge the Rateable Value
- If you believe your rateable value is too high, submit a Challenge case with supporting evidence.
- This might include rental agreements, property details, or market comparisons.
- The VOA will review the case and either accept the challenge or uphold the original valuation.
5. Appeal the Decision
- If the Challenge case is unsuccessful, businesses can appeal to the independent Valuation Tribunal.
- The tribunal reviews the case and makes a final decision on whether the rateable value should be adjusted.
Throughout this process, businesses must continue paying their business rates. If a challenge or appeal is successful, the local council will adjust the bill accordingly.
What Discounts and Reliefs Are Available for Business Rates?
The UK government provides several relief schemes to help businesses reduce their business rates liability. These schemes vary depending on factors such as property size, business type, and location.
Small Business Rate Relief (SBRR)
Small Business Rate Relief is available to businesses with a rateable value of less than £15,000.
- Businesses with a rateable value of £12,000 or less receive 100% relief, meaning they do not have to pay business rates.
- Businesses with a rateable value between £12,001 and £15,000 receive tapered relief, gradually reducing as the rateable value increases.
This relief is not automatically applied in all cases. Business owners must check with their local council and submit an application if necessary.
Retail, Hospitality, and Leisure Relief
This relief is available for retail, hospitality, and leisure businesses, such as shops, restaurants, hotels, and pubs.
- In the 2024-2025 financial year, businesses in these sectors can receive 50% relief on their business rates bill.
- The discount is capped at £110,000 per business across all locations.
To benefit from this relief, businesses should check eligibility with their local council and apply if necessary.
Transitional Relief
Transitional relief is designed to protect businesses from sudden increases in business rates due to revaluation.
- If a business’s rateable value increases significantly after a revaluation, transitional relief helps to phase in the higher charges gradually over several years.
- The latest business rates revaluation took effect in April 2023, meaning some businesses may qualify for transitional relief.
Local councils automatically apply this relief where applicable. Businesses can check with their local authority to confirm eligibility.
What Happens If You Don’t Pay Your Business Rates on Time?
Business rates must be paid to the local council in regular instalments, typically over 10 or 12 months. Failure to pay on time can lead to serious consequences.
Consequences of Late Payment
- Reminder Notices: If a payment is missed, the local council will issue a reminder notice. The business has seven days to make the payment.
- Court Summons: If the payment is still not made, the council can apply for a liability order through the courts, adding extra legal costs to the bill.
- Bailiff Action: Councils can send enforcement officers (bailiffs) to recover unpaid business rates. This may involve seizing business assets to cover the debt.
- Business Closure: In extreme cases, continued non-payment could lead to legal action that results in forced business closure.
What to Do If You Can’t Pay?
If a business struggles to pay its rates, it is advisable to contact the local council immediately to discuss:
- Payment plans: Councils may offer an extended payment schedule to ease financial pressure.
- Relief schemes: Businesses should check whether they qualify for reliefs that could reduce the bill.
- Temporary reductions: In cases of financial hardship, councils may consider temporary reductions or deferrals.
Ignoring business rates bills can make the situation worse. Businesses should seek financial advice or support as early as possible.
How Often Are Business Rates Revalued in the UK?
Business rates are typically revalued every five years to ensure they reflect current property rental values. The most recent revaluation took place in April 2023.
Why Are Revaluations Important?
- They help ensure that businesses are paying fair rates based on updated property values.
- Revaluations can lead to increases or decreases in business rates, depending on market conditions.
- Transitional relief is often introduced to cushion businesses from sharp increases in rates.
The next scheduled revaluation is expected in April 2028, unless the government changes the frequency of assessments.
Where Can You Find Help and Advice on Business Rates?
If you need assistance with business rates, there are several sources of help available:
- Valuation Office Agency (VOA): Provides information on rateable values, challenges, and appeals.
- Local Councils: Handle billing, payments, and relief applications. Each council has its own business rates department.
- Business Advisors and Accountants: Offer expert guidance on managing tax obligations and reducing liabilities.
Seeking professional advice can help businesses navigate the complexities of business rates and identify opportunities to reduce costs.
Conclusion
Understanding and managing business rates is essential for UK businesses to ensure financial stability. By knowing how to calculate business rates using the rateable value and multipliers, businesses can accurately budget for this expense.
Relief schemes such as Small Business Rate Relief, Retail Relief, and Transitional Relief can significantly reduce costs, making it crucial to check eligibility.
Regularly reviewing your rateable value and knowing how to challenge incorrect valuations can prevent overpayment. Timely payments help avoid penalties and enforcement actions. If financial difficulties arise, contacting the local council for support is advisable.
By staying informed and proactive, businesses can manage their tax obligations efficiently while optimising their financial resources.
FAQs
How do I find my business property’s rateable value?
You can check your rateable value on the Valuation Office Agency (VOA) website or contact your local council.
Can I reduce my business rates?
Yes, you may qualify for reliefs such as Small Business Rate Relief, Retail Relief, or Transitional Relief.
What happens if I overpay my business rates?
If you have overpaid, you can apply for a refund from your local council.
Can I appeal my rateable value?
Yes, you can challenge your valuation through the VOA Check and Challenge process.
Do business rates apply to home-based businesses?
If you use a significant part of your home for business, you may be liable for business rates.
