Business rates are a tax on commercial property in the UK, and for many small firms they represent one of the largest fixed costs after rent and wages. This guide explains how business rates are calculated for 2026/27, which reliefs you can claim -- including 100% small business rate relief for properties with a rateable value under GBP 12,000 -- and how to challenge a rateable value you think is too high.
Business rates -- formally known as National Non-Domestic Rates (NNDR) -- are a property tax levied on most non-residential premises in England, Scotland, Wales and Northern Ireland. They apply to offices, shops, warehouses, factories, pubs, hotels, and even some car parks and advertising hoardings. Unlike council tax, which applies to residential property, business rates are collected by local billing authorities but largely flow into a central pool that is then redistributed to councils.
The tax has existed in various forms since the 16th century, but the modern system dates from the Local Government Finance Act 1988. Every five years (known as a revaluation), the Valuation Office Agency (VOA) reassesses the rateable value of every non-domestic property in England and Wales, using evidence of open-market rental values at a fixed date two years before the new list comes into force. The most recent revaluation took effect on 1 April 2023, using April 2021 rental evidence.
The rateable value is not the same as the rent you pay or the sale price of the property. It is simply the VOA's estimate of what the annual open-market rent would be if the property were available to let on the open market at the valuation date. The rateable value is then multiplied by a pence-in-the-pound figure called the multiplier to produce your gross rates bill before any reliefs are applied.
Because business rates can be a significant cost, the government provides a range of statutory reliefs and discretionary discounts. Understanding which reliefs you qualify for -- and making sure you are actually claiming them -- is one of the most practical ways to manage your occupancy costs.
Your annual business rates bill is calculated using a simple formula: rateable value multiplied by the rates multiplier. For 2026/27, there are two multipliers in England:
As a worked example, a retail unit with a rateable value of GBP 30,000 would have a gross bill of GBP 30,000 x 0.499 = GBP 14,970 per year before any relief. If the same business qualified for the 40% retail, hospitality and leisure (RHL) discount available in 2026/27, it would save GBP 5,988, leaving a net bill of GBP 8,982 -- subject to the GBP 110,000 cap across all their properties.
For properties in the GBP 15,001 to GBP 50,999 range that do not receive SBRR but are below the standard multiplier threshold, the small business multiplier applies, which saves around 5.6p per pound compared with the standard rate. Even if you do not qualify for any named relief, this lower multiplier is worth keeping in mind when choosing between two properties of similar size but different rateable values.
Multipliers are set annually by central government and are typically uplifted in line with the Consumer Price Index (CPI) each September, which feeds into the following April's rates year. This is why bills tend to rise even if the rateable value of your property does not change.
Your billing authority will send you a rates demand notice each April. The bill shows the rateable value, the multiplier applied, any mandatory or discretionary reliefs, and the final amount payable. You can pay in monthly instalments (usually ten or twelve over the year) or as a lump sum. Direct debit is the most common method.
Small business rate relief (SBRR) is the most valuable statutory relief for many independent businesses. The 2026/27 thresholds are unchanged from recent years:
To be eligible for SBRR in England, you must meet two conditions. First, you must be the ratepayer (occupier) of the property -- relief is not available to landlords of empty or let properties. Second, you must either occupy only one property in England, or if you occupy additional properties, each of those additional properties must have a rateable value below GBP 2,899. If you take on a second property whose rateable value is GBP 2,900 or more, you will normally lose SBRR on the main property -- though transitional arrangements may apply for a short period.
In practice, relief does not always apply automatically. You need to notify your local billing authority that you are eligible. Most councils have a simple application form, and once granted the relief is renewed automatically as long as your circumstances do not change. If your rateable value changes following a revaluation or a successful challenge, your entitlement to SBRR will be reassessed.
The tapered relief formula between GBP 12,001 and GBP 15,000 works as follows: relief percentage = (GBP 15,000 minus rateable value) divided by GBP 3,000, multiplied by 100. So a property with a rateable value of GBP 13,500 would receive (GBP 15,000 minus GBP 13,500) / GBP 3,000 x 100 = 50% relief. With a small business multiplier of 49.9p, the gross bill would be GBP 13,500 x 0.499 = GBP 6,737, and after 50% relief the net bill would be GBP 3,368 per year.
Wales operates its own SBRR scheme with different thresholds. Scottish businesses are covered by the Small Business Bonus Scheme (SBBS), and Northern Ireland uses a separate system. This guide focuses on England unless otherwise stated.
Beyond SBRR, there are several other reliefs that businesses in England may be able to claim. Some are mandatory (meaning councils must grant them if you qualify) and others are discretionary (meaning the council can choose whether to award them and on what terms).
Eligible retail, hospitality and leisure properties in England receive a 40% discount on their business rates bill in 2026/27. This applies to occupied shops, restaurants, cafes, bars, cinemas, live music venues, hotels, gyms, spas, and similar premises. The cap is GBP 110,000 per business (not per property), so larger operators will exhaust the discount across their portfolio. The relief is granted by billing authorities and you should receive it automatically if your property type is eligible and your council has your details, but always check your bill.
Registered charities and community amateur sports clubs (CASCs) receive 80% mandatory relief if the property is used wholly or mainly for charitable purposes. Councils also have discretion to award an additional 20% (up to 100% total). Applications go directly to the billing authority. The property must be occupied -- empty property is only eligible for mandatory relief in limited circumstances, such as when it is owned by a charity and was last used for charitable purposes.
Businesses locating to designated Enterprise Zones may qualify for 100% business rates relief for up to five years. The aim is to encourage investment in specific areas designated by central or mayoral government. The zones and the qualifying conditions change over time, so check the Enterprise Zones UK website or your local authority for current designations.
Properties in rural settlements with a population below 3,000 can qualify for rural rate relief if they are the only general store, post office, petrol station, food shop, or pub in the settlement. Mandatory relief of 100% applies to properties with a rateable value up to GBP 8,500 (general stores and post offices) or GBP 12,500 (other qualifying uses). Councils can award additional discretionary rural relief on top.
Councils have a general power to grant discretionary relief to businesses where they think it is in the public interest to do so. This is sometimes used for social enterprises, local sports clubs, or businesses that provide important local services but do not qualify for mandatory charity relief. Awards are at the council's discretion and vary enormously by area. It is always worth asking, even if you think you are unlikely to qualify.
One of the most misunderstood aspects of business rates is that they continue to apply when a property is unoccupied -- but with an initial period of free relief before the full bill kicks in. For standard commercial properties (shops, offices, and similar), there is a three-month rate-free period. For industrial properties such as warehouses, factories, and storage units, the exemption is six months.
After the exemption period, the full rates bill is payable at 100% of the standard rate (using the standard multiplier, not the small business multiplier). This can be a significant burden on landlords whose properties are vacant between tenants, or on businesses that have closed temporarily due to refurbishment, financial difficulty, or other circumstances.
Some properties are permanently exempt from empty property rates, including:
A well-known strategy to restart the empty property clock is to arrange a genuine but short-term occupation of the property -- for example, letting a charity use it briefly -- before it becomes empty again. This resets the three- or six-month exemption period. HMRC and billing authorities scrutinise such arrangements carefully, and a sham occupation purely to avoid rates will not be effective and could attract penalties.
If your business suffered a period of forced closure -- for example due to a fire, flood or other damage -- you may be entitled to void relief during that period. You need to notify your billing authority promptly, as backdated claims can be time-limited.
If you believe your property's rateable value is too high -- perhaps because comparable properties nearby are assessed at a lower level, or because the VOA has incorrect details about the size or specification of your premises -- you have the right to challenge it through the Check, Challenge, Appeal (CCA) process in England.
The process has three stages:
It is important to note that a Challenge does not automatically reduce your rates bill while it is being considered. You continue to pay at the current assessed level, and any reduction is backdated to the date you submitted your Check. This means it is worth starting the process promptly, especially if you believe the overassessment is significant.
Many businesses use a specialist rating surveyor or commercial property agent to handle their appeals. These professionals are paid on a no-win no-fee basis in many cases, taking a percentage of any saving achieved. However, be cautious of cold-call firms that claim guaranteed savings -- there are no guarantees in the appeals process, and some firms charge upfront fees without delivering results.
In Wales, the appeals process runs through the VOA and the Valuation Tribunal for Wales. Scotland uses a separate system through the Scottish Assessors and the Valuation Appeal Committee. Northern Ireland operates through Land and Property Services (LPS) and the Lands Tribunal.
Business rates do not exist in isolation -- they are part of the wider cost structure of running a business, and understanding how they interact with other taxes helps you manage your total liability more effectively.
Business rates are an allowable deduction when calculating taxable profit for corporation tax or income tax purposes. If your business pays GBP 8,000 in net business rates after relief, that amount reduces your taxable profit. For a company paying the small profits rate of 19% corporation tax (on profits under GBP 50,000), this saves GBP 1,520 in tax. For a company paying the main rate of 25% (on profits above GBP 250,000), the saving is GBP 2,000. Sole traders and partners pay income tax on profits at rates of 20%, 40%, or 45% depending on their income level.
Business rates are not subject to VAT. The VAT registration threshold in 2026/27 is GBP 90,000 of taxable turnover, and rates bills do not count towards that threshold. Rates are also not claimable as input VAT even if your business is VAT-registered.
If your business employs staff, employer National Insurance is another major occupancy- related cost. In 2026/27, employer NI runs at 15% on earnings above GBP 5,000 per employee per year, but the Employment Allowance of GBP 10,500 offsets this for eligible smaller businesses. Understanding the combined cost of rates, employer NI, and rent is essential when assessing the true cost of a commercial property.
Businesses considering purchasing a commercial property rather than renting should also factor in Stamp Duty Land Tax (SDLT). For non-residential property in 2026/27, SDLT rates are 0% up to GBP 150,000, 2% on the portion from GBP 150,001 to GBP 250,000, and 5% above GBP 250,000. This is separate from the residential SDLT thresholds and the additional 3% surcharge on investment properties.
Finally, if you own a commercial property as an investment and later sell it, the gain may be subject to capital gains tax (CGT). In 2026/27, the annual exempt amount (AEA) is GBP 3,000. Commercial property gains do not qualify for the residential property rate of 24% -- the rate that applies depends on whether Business Asset Disposal Relief (BADR) is available. BADR reduces the CGT rate to 18% for qualifying business disposals, subject to a GBP 1 million lifetime limit.
If you have not reviewed your business rates position recently, there are several practical steps worth taking to make sure you are not overpaying.
Start by checking your current rateable value on the VOA website. Look at the property details the VOA holds and compare them with the actual floor area and specification of your premises. Errors in floor area measurements are not uncommon and can result in significant overcharges. If you spot a factual error, initiate the Check stage of the CCA process promptly.
Then check whether you are claiming all the reliefs you are entitled to. Contact your billing authority directly or check your latest rates demand to confirm that SBRR, RHL discount (if you are in a qualifying sector), charity relief, or any other applicable relief has been applied. If it has not, contact the council -- you may be entitled to a backdated refund in some cases.
If you are considering moving premises, compare the rateable values of potential properties before you commit. A property with a lower rateable value in a slightly less prime location may cost you significantly less in rates per year than a higher-value property, even if the rent is similar. Use the VOA search tool to look up the rateable value of any property before you sign a lease.
Consider whether any structural changes to your premises -- such as a partial demolition or a change in use -- might justify a material change of circumstances (MCC) assessment request to the VOA. Significant changes to the property or the locality (such as a nearby construction project that disrupts trade) can form the basis of a temporary reduction in rateable value while the disruption continues.
Finally, keep good records. If you ever need to challenge your rateable value or claim a period of void relief, having contemporaneous records of your occupation, any closures, and any correspondence with the billing authority will support your case. Rates can go back several years in an appeal, so documentation from the start of your tenancy or ownership can be valuable.
