Please note that this article is intended for educational purposes only and should not be deemed to be or used as legal, employment, or health & safety advice. For guidance or advice specific to your business, consult with a qualified professional.
In the UK, if you own or lease a commercial property, you’ll have to pay annual business rates, also known as non-domestic rates. These are considered contributions towards community services like education and transport. The rateable value is the figure your local council uses to decide how much you need to pay each year.
It’s important to know the definition if you operate in commercial premises because it can significantly impact and add to your business costs.
How rateable values are calculated
All non-domestic properties will have a rateable value which the local authority uses to calculate payments and any rate relief. The figure is a property’s open market rental value on 1 April 2015, based on an estimate made by the Valuation Office Agency, which is part of the Government’s revenue and customs department. This figure is then multiplied by a rates multiplier to give you the amount you need to pay, or you can estimate it yourself.
For example, if your property would have been leased for £70,000 per annum in 2015, your rates bill will be based on that £70,000. You then use the relevant multiplier:
- Standard multiplier 2022/23: 51.2 pence
- Small business multiplier 2022/23: 49.9 pence (only use if your rateable value is under £51,000 per annum)
So, your annual bill will be £70,000 x 0.512 = £35,840. You may be able to reduce this with some transitional arrangements or rate reliefs.
How you run your business has no bearing on your rates bill – whether you’re self-employed or have a limited company, if you operate out of commercial property, you’ll be liable for rates. It’s also usually the occupier’s responsibility to pay them rather than the landlord, much like if you rented your home, it would be you who paid the council tax.
Rateable value appeals
If you think your rateable value is too high, you can challenge it, and if you succeed you can have it changed. The Valuation Office may ask for rental evidence so it can conduct an assessment and calculate the correct value of the property. You can challenge your rateable value by following the steps on the GOV.UK website.
Changes to rateable value
It does change from time to time with periodic revaluations – this is when the Valuation Office alters the rateable values based on property market trends and changing property prices. The last one occurred in 2017, based on 2015 prices.
Small business rate relief
Business rates can represent a significant additional cost for a business, but you may be entitled to rate relief or be exempt altogether. As previously mentioned, if your rateable value is under £51,000 you use the lower 49.9 pence figure. If, however, your valuation is under £15,000 and you only have one property (relief can still apply under certain conditions if you use more), you could be exempt from some or all the costs.
- Under £12,000 – you won’t pay business rates
- £12,001 to £15,000 – The rate of relief will decrease from 100% to 0%
For example, a rateable value of £13,500 will entitle you to a 50% discount.
Frequently asked questions
How can I find the rateable value of a property?
It will be on the front of your local authority bill. You can also look it up via the government website
When are rateable values updated?
Revaluation takes place every five years, and the latest revaluation will take effect in 2023. There are proposals to increase the frequency to every three years to make the system fairer and more responsive, but these have yet to be implemented.