How business rates are calculated in England

Business rates are a tax on most non-domestic property, from shops, offices and pubs to warehouses, factories and holiday lets that meet the qualifying rules. For many small firms they are one of the largest fixed costs after rent. The bill is built from a few separate pieces, and understanding each one is the first step to checking whether you are paying the right amount.

This guide covers England. Wales, Scotland and Northern Ireland have their own systems, with different multipliers and reliefs.

Rateable value

Every non-domestic property in England has a rateable value, set by the Valuation Office Agency, which is part of HMRC. It is an estimate of the open market rent the property could have been let for on a fixed valuation date, assuming certain standard lease terms. It is not the rent you actually pay, and it is not the property's sale value.

Valuations are refreshed at periodic revaluations so that they keep pace with the rental market. Between revaluations, a property's rateable value can change if something material happens, such as an extension, a split into separate units or major changes in the surrounding area.

You can look up the rateable value of any property, and see how it was worked out, using the find a business rates valuation service on GOV.UK.

The multiplier

The council does not charge the rateable value itself. It multiplies the rateable value by a figure set by central government, known as the multiplier and expressed in pence per pound.

The government has the power to set different multipliers for different types and sizes of property, and smaller properties have long paid a lower rate than larger ones. The current multipliers are published on GOV.UK and usually change at the start of each financial year in April.

So a basic bill is rateable value multiplied by the relevant multiplier. Reliefs are then deducted.

Reliefs

Reliefs are where the biggest savings are, and they are not always applied automatically. The main ones include:

• Small business rate relief, for businesses that occupy one property, or a main property with other small ones, below set rateable value thresholds. The smallest properties can pay nothing at all.
• Charitable rate relief, which gives charities and community amateur sports clubs a large mandatory reduction on properties used for their charitable purposes. Councils can top this up.
• Rural rate relief, for certain businesses such as the only village shop or post office in a qualifying rural settlement.
• Empty property relief, a short period with no rates after a property becomes vacant, before full rates normally apply.
• Discretionary relief, which councils can grant in other circumstances, including hardship.

Governments also introduce temporary reliefs for particular sectors from time to time. Your council's website will list what is available locally and how to apply.

Checking and challenging your valuation

The Valuation Office Agency runs a process known as check, challenge, appeal.

First, you check the facts held about your property, such as its floor area and use, and report anything that is wrong. If the facts are right but you still believe the rateable value is too high, you can make a challenge, setting out your reasons and evidence such as rents on comparable properties nearby. If you disagree with the agency's decision on your challenge, you can appeal to the independent Valuation Tribunal for England.

Strict time limits apply at each stage, so start promptly after a new valuation or a change to your property.

Be wary of unsolicited calls or letters from firms offering to cut your rates in return for an upfront fee. Some are legitimate rating surveyors, many of whom are members of the Royal Institution of Chartered Surveyors. Others are not. The check and challenge process is free to use yourself, and the Valuation Office Agency publishes guidance on how to do it.

Bills are sent and collected by your local council, usually in ten monthly instalments, although you can ask to pay over twelve.