What are business rates? A guide for small businesses

What are business rates, how much are they and does every small business have to pay them? Sophie Attwood of Colliers answers your questions

• Business rates can be roughly defined as the tax paid for the occupation of a non-domestic property.
• Under the business rates retention arrangements introduced in April 2013, authorities keep a proportion of the business rates paid locally. However, business rates are a controversial tax as they represent one of the biggest overheads for business.
• Business rates are set by central government more specifically the Valuation Office, an agency of Her Majesty’s Revenue and Customs (HMRC). The VOA calculates your business rates based on “rateable value” (RV). It compiles and maintains a full list of all rateable values. The rateable value of your property is shown on the front of your bill.
• To estimate your business rates bill, just multiply your rateable value by the appropriate multiplier.

What are business rates?

Business rates are one of the UK’s oldest taxes; its origins can be traced back to the Poor Law of 1601. Business rates can be roughly defined as the tax paid for the occupation of a non-domestic property. They approximately correspond to 50% of the annual rent of the property. Business rates are based on a specific value, known as “rateable value” and all commercial properties are valued on the same day.

Non-domestic rates or business rates are the way that those who occupy commercial (non-domestic) property contribute towards the cost of local authority services. They are administered and collected by local authorities. Under the business rates retention arrangements introduced in April 2013, authorities keep a proportion of the business rates paid locally. However, business rates are a controversial tax as they represent one of the biggest overheads for business.

Who sets non-domestic rates?

Business rates are set by central government more specifically the Valuation Office, an agency of Her Majesty’s Revenue and Customs (HMRC). The VOA calculates your business rates based on “rateable value” (RV). It compiles and maintains a full list of all rateable values. The rateable value of your property is shown on the front of your bill.

This broadly represents the yearly rent the property could have been let for on the open market on a particular date specified in legislation. For the current 2026 rating list, this date was set as April 1, 2026.

The Valuation Office Agency may alter the valuation if circumstances change. The ratepayer (and certain others who have an interest in the property) can also check and challenge the valuation shown in the list if they believe it is wrong.

It is also important to note that business rates are handled differently in Scotland and Northern Ireland. Check out this website for info on non-domestic rates in Scotland and this one for business rates in Northern Ireland.

>See also: What is the Valuation Office Agency? A guide for small business

How do business rates work?

It is important to understand how non-domestic rates work to ensure that your rateable value is 100% correct. Business rates can be estimated using the multiplier set by the VOA. The current multiplier is around 50p to the pound.

The large multiplier is applicable to larger businesses with a RV of £51,000 and above, the small business multiplier is below £51,000, and all premises which are empty with a RV of £2,900.

As of April 2026, there are five multipliers:

Small Business RHL (Retail, Leisure, Hospitality): 38.2p
Small Business non-RHL: 43.2p
Standard RHL: 43p
Standard non-RHL: 48p
Large (all properties): 50p

Another vital part of the rating system to understand is the new appeals scheme launched by the VOA in 2017 known as Check, Challenge, Appeal (CCA). This scheme places the onus on the ratepayer to check their assessment before challenging or appealing. The three stages are:

Check: At this stage factual matters about the property need to be carefully confirmed. Once the Check document is submitted the VOA has 12 months to consider it and respond.

Challenge: Once the facts have been confirmed and within four months of the Check decision, a detailed assessment accompanied with a valuation will make up a typical Challenge document to send to the VOA to change the RV. You cannot submit a challenge against the same valuation, for the same reason, more than once. If you do your submission will not be valid. Finally, the VOA will issue a decision notice on the Challenge submission accordingly. The matter should then be finalised. However, should the VOA disagree with your Challenge there is a right to appeal.

Appeal: Your appeal will need to be taken to the Valuation Tribunal for an independent review within four months of the challenge decision. If the case does reach the appeal stage, the appellants can present their case to a panel who will cross examine the case. A decision will then be issued 28 days after proceedings.

Understanding how business rates work and the procedures to challenge the current assessment can be complicated. Our expert team at Colliers can help represent and advise you.

>See also: How can I reduce my business rates in England? A small business guide

Who pays non-domestic rates landlord or tenant?

Non-domestic rates are paid by the occupier of the premises. This will usually be the landlord or the tenant. In some cases, the landlord of the property charges the occupier a rent which also includes the business rates. The tenant and landlord can decide who is responsible to make the payment. However, the bill remains in the name of the occupier. If the bill is not paid, action will be taken against the occupier.

Properties that are empty still need to pay the bill that is due. If there is no occupier, the rates bill falls onto the landlord after a three month period. This is usually the full bill. However, some properties can get extended empty property relief.  Industrial premises (warehouses, for example) 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, and properties owned by charities – only if the property’s next use will be mostly for charitable purposes.

Rating experts can advise you and check that you are paying the correct amount.

How much are business rates?

Rateable value represents the rent a property could have been let for on a certain day set in law. It may not be the actual rent payable on this date as the law makes assumptions based on the property’s condition. The rateable value is not the amount that you pay but is used by councils to calculate your rates bill.

To estimate the bill, just multiply your rateable value by the appropriate multiplier. This will tell you how much you’ll be paying in business rates for the year. Subtract any business rates relief you’re entitled to (more on that in a moment).

Depending on individual circumstances, a ratepayer may be eligible for a rate relief (i.e. a reduction in its business rates bill). There are a range of available reliefs. Some are permanent reliefs, but temporary reliefs are often introduced by the government at Budgets. Ratings experts can advise you here. This webpage from the government tells you which reliefs are available.

For Small Business Rate Relief, the best thing to do is contact your local council to see if you’re eligible. While you’re there, they’ll be able to tell you which other reliefs are available to you.

Prime Minister Andy Burnham has announced a 20% business rates cut for pubs, clubs and live music venues in England, with more details to be released in the Autumn Budget 2026.

See also: Pubs, clubs and live music venues to get 20% business rates cut

As part of changes announced in the Budget, bill increases for the smallest businesses losing some or all of their small business rates relief or rural rate relief are capped at the higher of £800 or the relevant transitional relief caps listed below from April 1, 2026.

Source: gov.uk

The government has also expanded the 2026 Supporting Small Business scheme to ratepayers losing their retail, hospitality and leisure (RHL) relief. This will apply for three years from April 1, 2026.

How to register for business rates

To register for business rates, you can contact a reputable firm of rating surveyors who can contact the local council to inform them of your occupation if it is a new site that needs to be assessed. Otherwise, you can check your business rates on the VOA website and can compare properties with similar size, locality and market to your property.

However, business rates can be very technical and confusing and there are a lot of legal statute and rules to adhere to when appealing, therefore we suggest if you need advice to get in contact with a qualified representative to assist you.

Sophie Attwood is a director of rating at Colliers and head of rating in the Liverpool office.

Further reading

Do I need to pay business rates working from home? Nearly half of the workforce was working from home at the height of Covid. But do you need to pay business rates if you’re working from home?

Inflation could spell £2bn rise in business rates – Small Business UK