Business rates are normally calculated using the rateable value of a non-domestic property and the multiplier that applies to it.
They are not based directly on a business’s turnover, profit, annual revenue or the amount it spends running the premises.
In England, the basic calculation is:
Rateable value × business rates multiplier = gross annual business rates
The local council then applies any reliefs, exemptions, transitional adjustments or supplements that affect the property.
Business rates are therefore separate from corporation tax, Capital Gains Tax, VAT and National Insurance, although they form part of the wider picture of how taxation affects a business.
The figures and examples in this guide primarily cover England for the 2026/27 financial year. Scotland, Wales and Northern Ireland operate separate non-domestic rating systems.
What Are Business Rates?
Business rates are a property-based tax charged on most shops, offices, warehouses, factories, pubs and other non-domestic premises.
The charge normally relates to the property that a business occupies rather than how much money the company earns.
A profitable business and a loss-making business occupying comparable properties may therefore receive similar gross business rates bills.
Revenue and profit can affect a company’s ability to pay the bill, but they do not normally determine its rateable value or multiplier.
Business rates should not be confused with:
· Corporation Tax on company profits
· VAT charged on taxable goods and services
· Employer National Insurance
· Capital Gains Tax on qualifying asset disposals
· Commercial rent paid to a landlord
The local council sends and collects the business rates bill, while the Valuation Office Agency is responsible for assessing rateable values in England and Wales.
What Does Rateable Value Mean?
The rateable value is an estimate of the annual rent a non-domestic property could have achieved on a specified valuation date. It is not necessarily the property’s current rent, sale price or final business rates bill.
For the rating list that took effect on 1 April 2026, rateable values in England are generally based on estimated open-market rental values on 1 April 2024.
The assessment may take account of the property’s size, layout, location, permitted use, facilities and rental evidence from comparable premises.
The Valuation Office Agency, rather than the local council or HMRC’s general tax department, determines the property’s rateable value.
A fuller explanation of how the VOA assesses business rates can help businesses understand why apparently similar premises may receive different valuations.
Businesses should examine the property description as well as the headline valuation. Incorrect floor measurements, missing structural changes or an inaccurate description of the property’s use can affect the assessment.
The official business rates calculation guidance also allows businesses to find their rateable value and review how it was determined.
How Are Business Rates Calculated?
The gross calculation starts by multiplying the rateable value by the applicable multiplier.
For example, a non-retail office with a rateable value of £20,000 and a multiplier of 43.2p would have the following initial calculation:
£20,000 × 0.432 = £8,640
This represents the gross annual amount before any applicable relief, exemption, transitional adjustment or local supplement is considered.
The calculation does not normally include:
· Business equipment such as computers and mobile phones
· Company vehicles
· Electricity or water costs
· Insurance premiums
· Repair and maintenance expenses
· The company’s annual turnover
· Depreciation charged in the company accounts
These costs may matter for accounting, tax or budgeting purposes, but they do not form the standard business rates formula.
Which Business Rates Multipliers Apply in 2026/27?
England moved from two principal multipliers to five multiplier categories from 1 April 2026.
The multiplier depends on the property’s rateable value and, below £500,000, whether the premises qualify as retail, hospitality or leisure property.
|
Property classification |
Rateable value |
2026/27 multiplier |
|
Qualifying retail, hospitality or leisure property |
Below £51,000 |
38.2p |
|
Other non-domestic property |
Below £51,000 |
43.2p |
|
Qualifying retail, hospitality or leisure property |
£51,000 to £499,999 |
43.0p |
|
Other non-domestic property |
£51,000 to £499,999 |
48.0p |
|
All qualifying property types |
£500,000 or more |
50.8p |
The multiplier is expressed in pence for every pound of rateable value. A multiplier of 43.2p is therefore entered into the calculation as 0.432.
The 2026/27 multiplier guidance explains how the property category and rateable-value band affect the multiplier used by a council.
The 2026 revaluation may cause a property’s rateable value to rise or fall, but the bill will not necessarily change by the same percentage.
The multiplier, reliefs and transitional arrangements must also be considered. The potential effect of these changes is examined further in the article on how VOA business rates affect companies.
What Do Business Rates Calculations Look Like in Practice?
Example One: A Small Office
A non-retail office has a rateable value of £20,000.
£20,000 × 0.432 = £8,640
Its gross 2026/27 bill would be £8,640 before any relief or adjustment.
Example Two: A Qualifying Retail Shop
A qualifying shop has a rateable value of £20,000.
£20,000 × 0.382 = £7,640
The lower retail, hospitality and leisure multiplier produces a gross bill of £7,640 before further adjustments.
Example Three: A Larger Warehouse
A warehouse has a rateable value of £600,000.
£600,000 × 0.508 = £304,800
Because its rateable value is at least £500,000, the high-value multiplier applies.
These are simplified examples. The amount displayed on an actual council bill may differ because of transitional relief, Small Business Rate Relief, local supplements, exemptions or changes occurring during the financial year.
Can Business Rates Relief Reduce the Bill?
Several relief schemes can reduce the amount a business pays. Eligibility depends on factors such as the property’s rateable value, its use, the number of properties occupied and the organisation operating from it.
Small Business Rate Relief
A business occupying one eligible property in England may receive 100% Small Business Rate Relief when its rateable value is £12,000 or below.
Relief normally reduces gradually for rateable values between £12,001 and £15,000. Properties with higher values may still use the applicable small-business multiplier without receiving percentage relief.
A company occupying more than one property may still qualify in limited circumstances, but additional-property and combined-value conditions apply. The council should be informed whenever another property is occupied.
Supporting Small Business Relief
Some businesses whose bills increased after the 2026 revaluation because they lost all or part of an existing relief may qualify for Supporting Small Business Relief. The scheme limits qualifying increases according to the current government rules.
Other Forms of Relief
Depending on the property and organisation, relief may also be available for:
· Charities
· Community amateur sports clubs
· Rural businesses
· Pubs and live music venues
· Properties affected by serious local disruption
· Businesses facing exceptional financial hardship
· Certain properties in enterprise zones or freeports
Relief is not automatically available merely because a business is new or has low profits. The council assesses eligibility using the relevant statutory or discretionary conditions.
Do Start-Ups and New Companies Pay Business Rates?
Start-ups and newly incorporated companies do not use a separate business rates calculation method.
If a new business occupies a rateable non-domestic property, the bill is calculated using the same rateable-value and multiplier system applied to established businesses.
Registering a company with Companies House or registering for tax with HMRC does not itself determine the business rates bill.
The important questions are:
· Whether the company occupies non-domestic premises
· What rateable value has been assigned to the property
· Which multiplier applies
· Whether the company qualifies for relief
· When occupation of the premises began
Before agreeing to a lease, a new company should examine the property’s current and future rateable values, ask the council about available relief and include business rates within its cash-flow forecast.
Business rates can be a substantial fixed expense even when sales are lower than expected.
They should therefore be considered alongside rent, energy, insurance and other steps involved in managing ongoing business expenses.
Who Pays Business Rates, the Tenant or the Landlord?
The person or organisation occupying a non-domestic property is normally responsible for the business rates bill. In many commercial leases, this means the tenant pays the council directly in addition to paying rent to the landlord.
Responsibility may be different when:
· The premises are empty
· Several businesses share the property
· The rent is advertised as inclusive of rates
· The landlord retains occupation or control
· Part of a property is separately assessed
· The lease contains specific payment arrangements
Businesses should check both the council account and the lease rather than assuming that business rates are included within the rent.
Are Business Rates Charged on Empty Properties?
An empty property in England can normally receive an initial period of Empty Property Relief. Most eligible properties receive three months without business rates, while qualifying industrial premises may receive six months in total.
After the relevant relief period ends, full business rates will usually become payable unless another exemption applies.
Different treatment can apply to certain listed buildings, low-value properties, charitable properties and premises intended for use by community amateur sports clubs.
The practical options and restrictions surrounding business rates on empty properties should be considered before a lease is surrendered, a building is left vacant or short-term occupation is arranged.
The council should be notified promptly when a property becomes empty or is reoccupied. Artificial occupation arrangements designed only to obtain another relief period may be examined closely.
Do Home-Based Businesses Pay Business Rates?
A person using a small part of a home for administrative work will not usually receive a separate business rates bill.
This may include working from a spare bedroom that continues to have domestic use outside working hours.
Business rates may become relevant when the Valuation Office Agency gives part of the home a separate non-domestic rateable value.
This could happen when:
· A room has been converted exclusively for business use
· Employees work regularly from the property
· Customers or clients frequently visit
· Significant structural alterations have been made
· The domestic and commercial areas are clearly separated
Council Tax may continue to apply to the residential part, while business rates may apply to the separately assessed commercial area.
How Can a Business Challenge Its Rateable Value?
A high bill does not automatically mean the rateable value is wrong.
The business should first compare the council bill with the rateable value, multiplier, reliefs and property information shown in the official rating record.
If the property information appears incorrect, the ratepayer can use a business rates valuation account to begin the formal process.
In England, this generally involves:
1. Confirming or correcting the property details through a check case.
2. Challenging the valuation after the check stage has been completed.
3. Appealing to the Valuation Tribunal when the challenge decision remains disputed or the relevant response deadline has passed.
Supporting evidence may include lease details, floor plans, photographs, rental evidence, information about comparable properties and records showing a material change affecting the premises.
The business should continue paying the amount requested while the matter is being considered unless the council confirms different payment arrangements. A successful challenge may lead to the bill being recalculated.
How Did the 2026 Revaluation Affect Business Rates?
The new rating list took effect on 1 April 2026 and reflects changes in property rental markets since the previous valuation date.
As a result, rateable values can move differently between locations, sectors and property types.
The revaluation does not set a uniform percentage increase for every company. A business occupying a retail unit in one town may experience a different change from an office, warehouse or hospitality venue elsewhere.
The House of Commons Library’s 2026 revaluation briefing explains that rateable values are reassessed regularly and multiplied by the relevant poundage or multiplier to establish annual liability.
Businesses should compare the previous and current rateable values, identify the multiplier used and confirm whether transitional or supporting relief appears on the bill.
Do the Same Business Rates Rules Apply Throughout the UK?
Business rates are devolved. England, Scotland, Wales and Northern Ireland do not use one identical set of multipliers, valuation authorities or relief schemes.
The calculation and multiplier table in this article apply primarily to England.
A business with premises elsewhere should use the official guidance for that nation:
· The Scottish Assessors Association and local council for Scotland
· The Valuation Office Agency and local authority for Wales
· Land and Property Services and the relevant district council for Northern Ireland
A company operating across several parts of the UK may therefore receive bills calculated under different national systems.
Conclusion
Business rates in England are principally calculated by multiplying a property’s rateable value by the applicable multiplier.
The final bill may then be changed by reliefs, exemptions, transitional arrangements and other adjustments.
Turnover, profit, running costs and depreciation do not form the standard calculation.
Businesses should instead confirm the property’s rateable value, identify the correct 2026/27 multiplier and examine whether all eligible reliefs have been applied.
Where property details or the valuation appear incorrect, the formal check, challenge and appeal process provides a route for requesting a review.
Frequently Asked Questions
Are Business Rates Based on a Company’s Turnover?
No. Business rates are not normally calculated using a company’s turnover, revenue or profit. In England, the gross bill is generally calculated by multiplying the property’s rateable value by the applicable business rates multiplier. Reliefs, exemptions and transitional arrangements may then affect the final amount payable.
How Can a Business Find Its Property’s Rateable Value?
Businesses can search for their property through the official business rates valuation service. The rating record normally shows the property’s address, description and rateable value. Businesses should confirm that details such as floor area, property use and structural features are accurate because incorrect information could influence the valuation.
What Is a Business Rates Multiplier?
A business rates multiplier is the figure applied to each pound of a property’s rateable value. It is usually expressed in pence. For example, a multiplier of 43.2p is entered into the calculation as 0.432. The applicable multiplier depends on the financial year, the property’s rateable value and, in some cases, its business category.
Can a New Business Receive Business Rates Relief?
A new business may qualify for relief, but relief is not awarded simply because the company has recently started trading. Eligibility normally depends on the property’s rateable value, how it is used, the number of properties occupied and the rules of the relevant relief scheme. The local council decides whether relief should be applied.
Does the Tenant or Landlord Pay Business Rates?
The occupier of a non-domestic property is normally responsible for paying business rates. In most commercial leases, this means the tenant pays the council directly. However, responsibility can differ when premises are empty, shared by several businesses or rented under an agreement that includes rates within the overall payment.
Do Empty Commercial Properties Pay Business Rates?
Empty commercial properties may receive a temporary exemption from business rates. Most eligible properties in England can receive three months of Empty Property Relief, while qualifying industrial premises may receive a longer initial period. Full business rates may become payable after the exemption ends unless the property qualifies for another exception.
Can a Business Challenge Its Rateable Value?
Yes. A business can challenge its rateable value when it believes that the property details or valuation are incorrect. In England, the process normally begins by checking and confirming the property information. A formal challenge may follow if the valuation remains disputed, with a further right of appeal in qualifying circumstances.
Editorial Note
This article focuses primarily on the business rates system in England for the 2026/27 financial year. Scotland, Wales and Northern Ireland operate separate non-domestic rating systems, with different multipliers, valuation procedures and relief arrangements.
Business rates rules, thresholds and property assessments can change. Businesses should confirm their rateable value through the official valuation service and review their council bill before making financial or property decisions.
Any author or reviewer credentials displayed with this article should reflect genuine professional experience or an actual specialist review.
