Understanding Business Rates Calculations
Business rates are a property tax levied on commercial properties in the UK. Calculating your business rates accurately is essential for financial planning and ensuring you're not overpaying. This comprehensive guide breaks down the calculation process into simple steps and explains the variations across different regions and property types.
The Calculation Formula
The basic formula for calculating business rates is:
Business Rates = Rateable Value × Multiplier
This calculation gives you the gross amount before any reliefs or exemptions are applied. Let's break down each component:
Step 1: Determine Your Rateable Value
The rateable value is an estimate of the property's open market rental value, assessed by the Valuation Office Agency (VOA). The current rateable values are based on rental values as of April 1, 2021, and will be in effect until the next revaluation.
You can find your property's rateable value on your business rates bill or by using the VOA's online service.
Step 2: Identify the Correct Multiplier
The multiplier (or Uniform Business Rate) is set annually by the government and varies depending on your property's location and rateable value.
England Multipliers (2024-2025)
- Small Business Multiplier: 49.9 pence (0.499) - For properties with a rateable value below £51,000
- Standard Multiplier: 54.6 pence (0.546) - For properties with a rateable value of £51,000 or more
Wales Multiplier (2024-2025)
- Uniform Multiplier: 56.2 pence (0.562) - Applied to all properties regardless of rateable value
Special Multipliers for London
Properties in London may be subject to additional supplements:
- Crossrail Business Rate Supplement: Additional 2 pence (0.02) for properties with a rateable value exceeding £70,000
City of London Premiums (2024-2025)
Properties in the City of London have additional premiums added to the multiplier:
- For Small Business Properties: Additional 1.6 pence (0.016)
- For Standard Properties: Additional 1.8 pence (0.018)
Step 3: Calculate the Basic Business Rates
Multiply your rateable value by the appropriate multiplier to get your base business rates.
Example 1: Small Business in England
For a property with a rateable value of £25,000:
£25,000 × 0.499 = £12,475
Annual business rates (before reliefs): £12,475
Example 2: Large Business in London with Crossrail Supplement
For a property with a rateable value of £100,000:
Standard multiplier: £100,000 × 0.546 = £54,600
Crossrail supplement: £100,000 × 0.02 = £2,000
Total: £54,600 + £2,000 = £56,600
Annual business rates (before reliefs): £56,600
Step 4: Apply Applicable Relief Schemes
Various relief schemes may reduce your business rates liability. The main reliefs include:
Small Business Rate Relief (SBRR)
For England:
- 100% relief for properties with a rateable value of £12,000 or less
- Tapered relief from 100% to 0% for properties with rateable values between £12,001 and £15,000
- The tapering is calculated as: Relief = ((£15,000 - Rateable Value) ÷ £3,000) × 100%
For Wales:
- 100% relief for properties with a rateable value of £6,000 or less
- Tapered relief from 100% to 0% for properties with rateable values between £6,001 and £12,000
- The tapering is calculated as: Relief = ((£12,000 - Rateable Value) ÷ £6,000) × 100%
Example: SBRR Calculation in England
For a property with a rateable value of £13,500:
Relief percentage: ((£15,000 - £13,500) ÷ £3,000) × 100% = 50%
Base business rates: £13,500 × 0.499 = £6,736.50
Relief amount: £6,736.50 × 50% = £3,368.25
Business rates payable: £6,736.50 - £3,368.25 = £3,368.25
Retail, Hospitality, and Leisure Relief
For 2024-2025, eligible retail, hospitality, and leisure businesses receive:
- 75% relief on business rates, up to a cash cap of £110,000 per business
- This relief is set to decrease to 40% for the 2025-2026 tax year
Transitional Relief
Transitional relief limits how much your business rates bill can increase or decrease each year following a revaluation. The caps for 2024-2025 are:
- For properties with RV ≤ £20,000: +10% cap on increases, -30% cap on decreases
- For properties with RV > £20,000: +25% cap on increases, -55% cap on decreases
Other Relief Schemes
- Empty Property Relief: 100% relief for first three months (six months for industrial properties)
- Charitable Rate Relief: 80% mandatory relief for properties occupied by registered charities
- Rural Rate Relief: Up to 100% for certain businesses in rural areas (population under 3,000)
Special Considerations
Multiple Properties
If you occupy multiple properties, your eligibility for SBRR may be affected:
- For a main property, you'll maintain SBRR for 12 months after occupying a second property
- After 12 months, SBRR continues if your other properties have rateable values ≤ £2,899 and the total rateable value of all properties is below £20,000 (£28,000 in London)
Interaction Between Relief Schemes
Some reliefs cannot be combined. For example, if transitional relief results in a bill that exceeds the SBRR threshold, SBRR will not apply. Always use the most beneficial relief scheme for your situation.
Using Our Business Rates Calculator
For a quick and accurate calculation that accounts for all applicable reliefs and regional variations, use the Business Rates Calculator. Our calculator simplifies this complex process by:
- Automatically applying the correct multiplier based on your property's location and rateable value
- Calculating all applicable relief schemes and showing which is most beneficial
- Providing detailed breakdowns of calculations for transitional relief scenarios
- Offering comparison data for multiple tax years to aid in financial planning