What are Business Rates? Calculator and Small Business Rate Relief explained

There are many costs to think about when starting a business. 

This includes business rates, a type of tax charged to businesses that occupy non-domestic or commercial properties.

Business rates are charged by local authorities to finance public services, similar to how you pay council tax.

In this article, we’ll guide you through everything you need to know about business rates, including the latest rates, how to calculate them, how to pay them, and any relief or exemption you may be entitled to.

Who has to pay business rates?

Business rates apply to any firm that occupies a non-domestic or commercial property, such as a shop, bar, office, or warehouse.

The property occupier — either the owner or leaseholder — must pay the business rate. Even if you only use part of a building for non-domestic purposes (for example, a shop with a residential flat above it), you’ll still need to pay business rates on the area that’s used for business. 

Similarly, if you work from home, you may have to pay business rates on the space within your house that’s used for business purposes.

How to calculate business rates

To calculate your business rates, you need to multiply the rateable value for your business with the “multiplier” (also known as the “poundage”) set by the government.

The rateable value is the value given on a premises by the Valuation Office Agency (VOA), which is based on its probable annual market rent. These values are reviewed every five years, and take the size of the property and its usage into consideration. Other parts of the premises may be valued at different levels.

Meanwhile, multipliers are the number of pence per pound of rateable value that you’ll have to pay in business rates before any relief or discounts are deducted. These are reviewed every year by the government in line with inflation.

As part of a government support package for small businesses and small to medium enterprises (SMEs), business rates multipliers for these businesses have been frozen at 49.9p for the 2024–2025 financial year.

Current business rates multiplier values

It’s worth knowing how to calculate your business rates yourself to ensure you’re paying the right amount, and to plan your financial year. To do this, simply:

1. Search for a property’s rateable value by postcode
2. Find the correct multiplier for the size of your business and location
3. Multiply your retable value by the correct multiplier

We’ll give you a quick example:

Jaya has a business in Wales. The rateable value of her business is £8,000. She should use the 2024–2025 small business multiplier (49.9p) to estimate her business rates as follows:

£8,000 (rateable value) x £0.499 (multiplier) = £3,992 (basic business rates)

As Jaya’s rateable value is between £6,001 and £12,000 she’ll be eligible for small business rate relief (SBRR) on a tapered basis from 100% to zero.

Small Business Rates Relief (SBRR)

The cost of living crisis has put significant cost pressures on startups and small businesses. As of October 2024, inflation in the UK was reported to be at 2.3%.

Moreover, the rising costs of rent and energy bills — combined with less consumer spending power — have made it more difficult for businesses to afford overheads, such as property costs.

Small business rate relief is a national discount scheme administered by local councils on behalf of the UK government.

In England, you can get SBRR if your property has a rateable value of £15,000 or less. SBBR is handled differently if your property is in Scotland, Wales or Northern Ireland.

SBRR is awarded on a sliding scale, depending on the size of your RV. If your property has a rateable value of £12,000 or less, you will get 100% relief from business rates. This rate will gradually decrease from 100% to 0% for properties with a rateable value between £12,001 and £15,000. For example:

• A property with a rateable value of £13,500 will net 50% off your bill
• A property with a rateable value of £14,000 will get 33% off

You can get SBRR if you have more than one property, as long as:

• None of your other properties have a rateable value of over £2,899
• The combined rateable value of all your properties is less than £20,000 (or £28,000 if they’re in London)

From there, the rateable values of the properties are added together, and relief is applied to the main property. You can find out if you qualify for SBRR by contacting your local council.

My small business doesn’t qualify for SBRR. What can I do?

In England, even if you don’t qualify for SBRR, you can still receive a discount on business rates as long as your property has a rateable value below £51,000.

In this scenario, your bill will be calculated using the small business multiplier, which is lower than the standard one (49.9p as opposed to 51.2p).

Can SBRR be backdated?

Yes, SBRR can sometimes be backdated, but it depends on the specific circumstances and the rules of the local authority in charge of business rates in your area. Most local councils will allow you to make backdated claims but there is usually a time limit for how far back you can claim. 

For example, some will backdate SBRR six years from April 1st in the current year. So if you were to make a backdate claim in 2025, you could request SBRR to be applied back to April 1, 2019.

To be eligible for SBRR backdating, your business must have met the qualifying criteria during the period for which you are claiming. For example, the property must have had a rateable value within the SBRR threshold during that time. You’ll also need to provide evidence proving that you met the eligibility criteria, such as proof of occupancy and rateable value.

Retail, Hospitality, and Leisure (RHL) Rates Relief Scheme

You can also receive relief if you run a hospitality, retail, or leisure business.

As of April 2023, all eligible firms now receive 75% off their business rates bills – capped at £110,000 per business – which will extend into the 2025 tax year.

For example, a typical shop with a rateable value increasing from £20,000 in 2017 to £21,500 in 2023 will receive RHL relief worth around £8,000, subject to the £110,000 cash cap per business.

Nurseries are also entitled to the same discount. To be eligible, your business must be on Ofsted’s Early Years Register, provide care and education for children up to five years old (the early years foundation stage), and not be a local authority-run nursery.

If these new business rates relief measures apply to your business, you do not need to take any action. Your local council will apply your discount automatically, which may involve re-issuing your bill.

Other business rate reliefs

Business rate relief schemes provide support to businesses by reducing or eliminating their business rates under specific circumstances. These are designed to ease the burden and help sustain your business.

Enterprise Zone relief

Charitable rate relief

Rural rate relief

Businesses based in rural areas won’t have to pay business rates if they’re eligible for rural rate relief. That covers:

• Retailers with a rateable value of up to £8,500
• Pubs or petrol stations with a rateable value of up to £12,500

To qualify for rural rate relief, your business must be located in a designated area of rural settlement listed in the rural settlement register, with a population of fewer than 3,000 residents.

Hardship relief

If your business is eligible for hardship relief, your local council can reduce or scrap your business rates. To get this relief, the council must agree that your business will be in financial difficulties without it, and that relief would be in the interest of your local community.

However, you may be asked for proof of your financial situation or how your business benefits the community.

You can find out more about additional relief schemes on the government website.

What businesses are exempt from business rates?

Certain businesses do not have to pay business rates. These include:

• Farm buildings and land (excluding buildings being used as offices for business activities)
• Buildings used for the training or welfare of disabled people
• Fish farms
• Places of public religious worship

Businesses that own an empty property are exempt from business rates for the first three months that it’s unoccupied, while industrial and warehouse buildings are exempt for the first six months. Once these periods are over, businesses will have to pay business rates as normal.

How to pay your business rates

Your local council will normally send you your business rates bill in March and April, and most will ask you to pay in equal monthly instalments. You can also determine your business rates bill using the government’s online calculator.

If you’re eligible for SBRR, this is usually applied automatically. However, you can contact your local authority if you think your bill is incorrect. Likewise, if you’re having cash flow problems and finding it difficult to pay the bill, make sure you contact your local council for help.

Changing your address can sometimes impact your business rates bill as well. Be sure to tell your local council if you start a new business or if you move premises, so they can charge you the right amount.

Conclusion

Understanding business rates is essential for managing your finances effectively. Getting your head around them might seem tricky, but it’s worth the effort to make sure you’re not paying more than you need to. After all, knowing how to calculate your rates and checking if you qualify for relief or exemptions can save your business a lot of money.

If you’re unsure about anything, reach out to your local council or use the government’s online tools to double-check. The more you know, the easier it’ll be to keep on top of your bills and focus on growing your business.