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How are business rates calculated?

Calculating your business rates ensures you’re paying the right amount on your commercial premises. It’s also helpful when planning for the financial year ahead, as well as if you're thinking of moving into new premises with different business rates. 

Find out how business rates are calculated and how to estimate yours with this simple guide.

What are business rates?

Business rates are a tax on property used for business purposes. They’re charged on properties including, but not limited to, offices, shops, pubs, warehouses and even your home if you work there.

When do you have to pay business rates?

Any business that occupies a building, or part of one, that’s used for non-domestic purposes is required to pay business rates. Business owners who work from home may need to pay business rates if the room they work in is used exclusively for business purposes.

Those working from home will have to pay business rates as well as Council Tax when:

  • The property is split into domestic and business sections, e.g., a flat above a shop
  • They sell things to people who visit the property
  • They employ anyone at the property

Find your business rates

To calculate your estimated business rates for the year ahead, you need to multiply the government’s up-to-date multiplier by the rateable value of your business.

What is a business rates multiplier?

 A multiplier (or poundage rate) is the number of pence-per-pound of rateable value that you need to pay through business rates. The government reviews the multipliers each year in line with inflation.

Access the government's current business rates multipliers.

What is rateable value?

Rateable value is the value assigned to non-domestic premises by the Valuation Office Agency. It’s based on a property’s annual market rent, size and usage.

The Valuation Office Agency (VOA) reviews these values every five years and often values properties at different levels. Click here to find the rateable value for your business premises.

How is rateable value calculated?

Using the ‘multiplier x rateable value’ formula mentioned above, here's an example to help you understand how the process works:

  • 49.9p— current business rates multiplier 2021/2022 for small businesses in England
  • £10,000 — rateable value of the small business premises
  • 0.499p x £10,000 = £4,990 estimated business rates for 2021/2022

Please note: Business rates are calculated differently in Scotland and Northern Ireland. You can find out more by accessing the Scottish government’s business rates calculator and Northern Ireland’s business rates calculator. 

Business rates holidays

Announced in March 2020, the government introduced a business rates holiday for businesses in the retail, leisure and hospitality sectors to help them through the disorder created by Covid-19.

The relief came in two forms:

  • A holiday from business rates for the 2020/21 tax year
  • Cash grants of £25,000 given to businesses with a rateable value between £15,000 and £51,000. Small businesses with a rateable value below £15,000 received a cash grant of £10,000

In March 2021, Chancellor Rishi Sunak announced in the Budget that this relief will last until the end of June. After this date, business rates will be discounted by two thirds up to a value of £2 million per business.

What if your business rates are wrong?

The first thing to check is the Valuation Office Agency (VOA)’s rateable value for your property. It’s also worth comparing the value with other similar properties in your area.

If you’re still convinced that the rateable value is incorrect, you can apply to have it changed.

How to appeal business rates

If you feel the valuation of your property is incorrect, you can challenge the Valuation Office Agency's decision.

Challenges to their decision can be made on the following grounds:

  • The valuation was wrong when the rating list was created
  • There’s been a change to the property or surrounding area that should be shown in the rateable value (e.g., roadworks that have been going on for a while)
  • A change made to the valuation by the VOA is wrong or hasn’t been made
  • The date of a change made by the VOA is wrong
  • The property should be split into more than one property, or combined with others into a single property
  • A property should be removed from, or added to, the rating list
  • The valuation is wrong due to a legal decision on another property
  • The property details are wrong or incomplete

For more details on when you can and cannot submit a challenge, what to do before you submit a challenge, and information on gathering and supplying evidence, head to the Gov.uk business rates portal.

Challenging the outcome

If you still don't agree with the VOA's decision, you may have the right to take your appeal to the Valuation Tribunal.

The Valuation Tribunal handles appeals against:

  • The entry in the rating list – the rateable value or some other part of the entry
  • A completion notice issued by the billing authority (local council) for a property
  • A transitional certificate issued by the VOA because of transitional relief, a scheme that tries to reduce the effect of any large changes in rateable value between rating lists

For more information on the appeals process, head to the Gov.uk page here.

What is business rates relief?

If your business has a rateable property value of less than £15,000 and uses only one property, you can apply for small business rates relief.

Full relief is available on properties with a rateable value of £12,000 or less. For those between £12,001 and £15,000, relief goes down incrementally from 100% to 0%.

So, if your rateable value is £13,500, you’ll get 50% off your bill. If your rateable value is £14,000, you’ll get 33% off.

Business rates when moving premises

If you're moving into or out of a non-domestic property or you own a property that's occupied or vacant, you'll need to get in touch with your local council so they can:

  • Work out the correct charge
  • Award any relief or exemption you may be entitled to
  • Send you a correct bill as soon as possible

Moving into a business premises

If you've moved into a business premises, then you'll need to contact your local council's business rates team and provide them with:

  • A copy of your lease, tenancy agreement or licence
  • Your email address
  • A contact telephone number

Moving out of a business premises

If you've moved out of a business premises, you'll need to contact your local council. You'll still be liable for the business rates at the premises if your lease or tenancy agreement hasn't ended.

When you're in touch with your council, you should provide:

  • The date your lease or tenancy ended
  • A contact address for them to send your closing bill
  • The name of the new owner or tenant of the premises

Exemptions on business rates

There are certain properties which may be exempt from business rates, including:

  • Agricultural land and buildings, including fish farms
  • Buildings used for the training or welfare of disabled people
  • Buildings registered for public religious worship or church halls

However, these exemptions are subject to strict legal requirements. If your property is based in England and you believe it should be exempt, be sure to get in touch with the Valuation Office Agency service.

How to avoid business rates on an empty property

If you have a building that's been empty for three months, you do not have to pay business rates on the building for that duration. When this period has ended, however, most business must pay full business rates.

Certain properties can get extended property relief, such as:

  • Industrial premises (such as warehouses) are exempt for a further three months
  • Listed buildings until they’re reoccupied
  • Buildings with a rateable value under £2,900 until they’re reoccupied
  • Properties owned by charities, but only if the property’s next use will be mostly for charitable purposes
  • Community amateur sports clubs’ buildings, but only if the next use will be mostly as a sports club

Be sure to get in contact with your local council to let them know when your property becomes vacant.

We hope you’ve found these business rates guides and resources helpful. But if you're still unsure, we’re more than happy to help with any problems or queries you might have. Be sure to contact our Customer Services team on 0161 837 3395 so we can get things sorted for you.

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