Business rates are a tax charged on most non-domestic properties, including shops, offices, warehouses, factories, pubs and other commercial premises.
They are based primarily on the property and its rateable value rather than the business’s profits, turnover or Corporation Tax bill.
In England, the Valuation Office Agency assigns each liable property a rateable value. The local council then uses the appropriate government-set multiplier to calculate the initial charge before applying any reliefs, exemptions or transitional adjustments.
Business rates are only one part of the wider tax and cost obligations facing an organisation. The distinction between property-based charges and taxes on business income is explained further when considering how taxation affects a business.
Last Updated: 23.07.2026
Key Takeaways:
- Business rates are charged on most non-domestic properties, including shops, offices, warehouses, factories, pubs and restaurants.
- They are based on the property’s rateable value rather than the business’s profits, turnover or Corporation Tax liability.
- The Valuation Office Agency determines the rateable value, while the local council calculates and collects the bill.
- The basic calculation is the property’s rateable value multiplied by the applicable business-rates multiplier.
- Reliefs, exemptions and transitional arrangements can reduce the amount a business must pay.
- A new rating list took effect on 1 April 2026, using property rental values based on the relevant valuation date.
- Business-rates rules differ across England, Scotland, Wales and Northern Ireland.
What Are Business Rates?
Business rates, formally known as non-domestic rates, are charged on properties used for commercial or other non-domestic purposes.
They are not a tax on business profits. A company can still receive a business-rates bill even if it makes a loss because liability is generally connected to the property it occupies or controls.
Properties that commonly attract business rates include:
- Shops and supermarkets
- Offices and professional premises
- Warehouses and distribution centres
- Factories and workshops
- Pubs, restaurants and cafés
- Hotels and guest accommodation
- Certain holiday-rental properties
- Buildings used partly for business purposes
Some properties are exempt, while others may qualify for partial or complete relief. Eligibility depends on the property, its use, its rateable value and the rules applying in that part of the UK.
The VOA business rates process is important because the rateable value assigned to the property becomes the starting point for calculating the bill.
Who Has to Pay Business Rates?
The person or organisation occupying the property will normally be responsible for paying business rates.
For a rented commercial property, this is usually the tenant rather than the landlord. However, the lease should be checked because liability can depend on the occupation arrangements and the terms agreed between the parties.
A landlord may become responsible when a property is empty. Empty-property relief can apply for an initial period, but the length of that period and any continuing exemption depend on the property type and circumstances.
People working from home do not normally pay business rates where they use only a small part of the property for ordinary home working.
A separate business-rates assessment may be required where part of the home has been altered exclusively for commercial use, customers regularly visit or employees work from the premises.
What Is Rateable Value?
Rateable value is an estimate of the annual rent a non-domestic property could have achieved on a specified valuation date. It is not the same as the property’s current rent, market value or final business-rates bill.
The Valuation Office Agency considers factors such as:
- The property’s location
- Floor area and layout
- Permitted and actual use
- Access and parking
- Facilities and physical characteristics
- Rental evidence from comparable properties
- Conditions in the property market on the valuation date
The type of business itself does not directly determine the bill according to its profits. However, the way the premises are used can affect how the property is valued and which multiplier or relief may apply.
Changes to the premises can also affect the valuation. Expanding the floor area, combining units, changing the property’s use or carrying out substantial improvements may lead to a reassessment.
The relationship between property changes and future liabilities is covered in more detail when examining how VOA valuations affect businesses.
How Are Business Rates Calculated?
The basic calculation in England is:
Rateable value × applicable multiplier = initial business-rates charge
The council then applies any reliefs, exemptions, supplements or transitional arrangements to determine the amount payable.
For example, suppose a property has a rateable value of £20,000 and the applicable multiplier is 0.432:
£20,000 × 0.432 = £8,640
The £8,640 figure would be the initial annual liability before any eligible relief or adjustment is applied.
The government’s official business rates calculation guidance confirms that rateable value is multiplied by the relevant multiplier and that eligible relief can reduce the resulting bill.
A more detailed explanation of the formula and the information appearing on a bill can be placed alongside the main overview through the site’s article on how business rates are calculated.
Which Business Rates Multiplier Applies?
The multiplier is a pence-per-pound figure used to convert the property’s rateable value into an initial annual charge.
From 1 April 2026, England moved from two principal multipliers to a five-multiplier structure. The applicable category depends on:
- Whether the premises qualify as retail, hospitality or leisure property
- Whether the rateable value is below £51,000
- Whether the rateable value is between £51,000 and £499,999
- Whether the property has a rateable value of £500,000 or more
Lower multipliers apply to qualifying retail, hospitality and leisure properties below the high-value threshold, while a higher multiplier applies to properties valued at £500,000 or more.
The current 2026/27 multiplier table explains the property categories and figures used by councils. The amount shown on an individual bill may also reflect relief, transitional arrangements and other adjustments.
Who Determines Business Rates?
Responsibility for business rates is divided between several public bodies.
The Valuation Office Agency
The Valuation Office Agency assesses non-domestic properties in England and Wales and assigns their rateable values. It maintains the rating list and considers requests to correct property details or challenge a valuation.
The Government
The government sets the multipliers and establishes national legislation covering reliefs, revaluations and transitional arrangements in England.
The Local Council
The council uses the rateable value and applicable multiplier to calculate the bill. It also applies qualifying reliefs, collects payments and handles billing enquiries.
This means the council does not normally decide the property’s rateable value. Questions about the valuation should generally be directed to the VOA, while questions about the bill, relief or payment arrangements should be directed to the council.
What Changed in the 2026 Business Rates Revaluation?
A new business-rates rating list took effect on 1 April 2026.
For properties in England, the new rateable values are generally based on estimated annual rental values as at 1 April 2024. The purpose of a revaluation is to bring property assessments closer to changes in the rental market.
A higher rateable value does not automatically mean the final bill will rise by the same percentage. Changes to multipliers, reliefs and transitional arrangements can alter the final amount.
The 2026 business rates revaluation briefing explains that revaluations took effect across the UK on 1 April 2026, while the detailed business-rates systems remain devolved.
Businesses should check that the VOA holds accurate information about their property, including its floor area, use and physical characteristics.
How Can a Business Reduce Its Rates Bill?
A business cannot normally reduce its rates simply by registering with the council, maintaining the building or making a general request for a lower charge.
The legitimate ways to reduce or correct a bill include the following.
Check the Property Details
Incorrect floor measurements, property descriptions or use information can affect the rateable value. Businesses should compare the VOA record with the actual premises and report factual errors.
Check Available Reliefs
Depending on the property and occupier, relief may include:
- Small Business Rate Relief
- Charitable Rate Relief
- Rural Rate Relief
- Transitional Relief
- Supporting Small Business Relief
- Relief for qualifying retail, hospitality or leisure premises
- Local discretionary relief
Some reliefs are applied automatically, while others require an application to the council.
Review Empty-property Liability
Most empty properties can receive an initial exemption before full business rates become payable. The standard exemption period is generally three months, with a longer period applying to certain industrial properties.
The treatment of vacant premises, occupation periods and continuing exemptions should be explained contextually through the guidance on business rates on empty property.
Challenge an Incorrect Valuation
A business can use its business-rates valuation account to report property changes or challenge a rateable value it believes is incorrect.
A challenge should be supported by relevant evidence, such as comparable rental information, property measurements or details showing that the VOA’s record is inaccurate.
Submitting a challenge does not normally suspend the existing bill. Payments should continue unless the council agrees to a different arrangement.
Contact the Council About Payment Problems
Businesses experiencing financial difficulty should contact the council before missing an instalment. The council may be able to discuss a revised payment arrangement, although it is not required to reduce the underlying liability.
Ignoring the bill can result in recovery action, additional costs and court proceedings.
Do Business Rates Work the Same Way Across the UK?
No. Business rates are devolved, so England, Scotland, Wales and Northern Ireland operate separate systems.
Each nation has its own multipliers or poundage rates, relief schemes, valuation arrangements and administrative procedures.
A business operating in more than one UK nation should not assume that the English rules apply to every property.
This article primarily explains the system in England. Businesses in Scotland, Wales or Northern Ireland should use the guidance published by the relevant national government and valuation authority.
Conclusion
Business rates are a property-based tax charged on most non-domestic premises. They are not calculated from business profits, turnover or the amount paid in other taxes.
The starting point is the property’s rateable value, which is multiplied by the applicable rate before reliefs and adjustments are applied.
Businesses should check the accuracy of their property record, confirm which reliefs apply and contact the correct authority when questioning either the valuation or the bill.
Following the 2026 revaluation, checking the new rateable value and understanding the multiplier used by the council are particularly important for budgeting accurately and identifying potential errors.
Editorial Note
This article has been reviewed to reflect the current business-rates framework in England, including the roles of the Valuation Office Agency, local councils and government-set multipliers.
Official government, parliamentary and local-authority guidance has been prioritised when explaining calculations, property valuations, reliefs and the 2026 revaluation.
Frequently Asked Questions
Are business rates based on business profits?
No. Business rates are primarily based on the rateable value of the property occupied or controlled by the business. A business may still have to pay rates even when it makes little or no profit.
Who pays business rates, the tenant or landlord?
The occupier of the commercial property usually pays business rates. In most rented premises, this will be the tenant, although the lease and occupation arrangements should always be checked.
What is the difference between rent and rateable value?
Rent is the amount agreed between a landlord and tenant. Rateable value is an assessment of the annual rent the property could have achieved on a specified valuation date and is used to calculate business rates.
Can a small business avoid paying business rates?
Some small businesses may qualify for Small Business Rate Relief, which can reduce or remove their bill. Eligibility normally depends on the property’s rateable value and whether the business occupies other properties.
Do home-based businesses pay business rates?
Ordinary home working does not usually result in business rates. A separate assessment may apply when part of the home is used exclusively for business, has been structurally altered or regularly receives customers or employees.
Do empty commercial properties have to pay business rates?
Most empty properties receive an initial exemption period. Business rates can become payable after that period unless the property qualifies for a continuing exemption or another form of relief.
Can a business challenge its rateable value?
Yes. A business can report inaccurate property details or challenge a rateable value through the appropriate valuation process. Evidence such as measurements, rental information and comparable properties may be required.
