How are business rates calculated?

how are business rates calculated

Business rates (also known as property tax or franchise tax) are a type of tax levied on businesses, organizations, and other entities with a physical presence in the UK. They are calculated as a percentage of the assessed value of the property.

What is a business rate?

What is a business rate

Business rates are an important part of business taxation in the United Kingdom. They are a tax on business profits and are based on the estimated value of the property used for business purposes.
There are different types of business rates, depending on the type of business. The main types are:

Property tax (or rate): This is a tax on the value of property used for commercial purposes. It includes land and buildings, but not fixtures or equipment.

Income tax (or rate): This is a tax on income from business activities. It includes profits from share trading, rental income, and other forms of income.

Commercial property rate:  This is a special type of property tax levied on businesses that have property used primarily for commercial purposes, such as shops, offices, warehouses, factories, and cinemas.

Some factors that affect business rates

Some factors that affect business rates

The type of business: Some types of businesses (e.g. restaurants, hotels, shops) are more likely to attract higher rates than others (e.g. factories and offices).

The size of the business: Generally, businesses with a larger footprint are more likely to attract higher rates than small businesses.

The use of space: Businesses that occupy more space (either in terms of square footage or a number of doors) are more likely to attract higher rates.

Location: A business’s location can affect its ability to receive a high business rate, as some areas are more expensive to operate in than others.

How are business rates calculated?

How are business rates calculated.

Business rates are a way of calculating the amount you have to pay for using a business property. They are based on the size and type of the property, and how much it is used. You can find out more about business rates on the HMRC website.

Who determines the business rates?

Who determines the business rates

The business rates are determined by the local authorities. They use a formula which takes into account how big the company is, how much it pays in other taxes and what its market value is.

When do business rates take effect?

When do business rates take effect

Business rate relief in the United Kingdom is calculated annually and can take effect as early as April 1st of the following year. The calculation process begins in October of the previous year and culminates in a publication of the business rates schedule in February. This schedule outlines how much each category of business will be charged based on its classification.

What can I do to reduce my business rates?

What can I do to reduce my business rates

There are a number of things that you can do to reduce your business rates. Some simple steps include keeping your property in good condition, registering with the local council and keeping up to date with changes to the business rate system.

Keeping your property in good condition is important for two reasons. Firstly, it can help to reduce the amount of renovation or repairs that you need to make in order to keep your property in compliance with the regulations.

Secondly, it means that your property is likely to be worth more when it comes time for renewal – meaning that you’ll be able to pay lower business rates for longer.

Registering with the local council is another important step that you can take to reduce your business rates. This will ensure that the authorities are aware of your business and that they are able to fulfil their regulatory duties should they arise.

It’s also advisable to register if you’re planning on carrying out any large-scale renovations or alterations to your property – this will help speed up the process should any problems develop later on down the line.


Business rates are an important part of running a business, and it’s important to know how they work in order to get the best possible deal. This article explains the different types of business rates and how they are calculated so that you can understand what your options are and make the best decision for your business.