Introduction
Learn about business rates on commercial properties that could affect you as a tenant. Understanding business rates is essential when budgeting for a new premises, as rates liability can sometimes exceed rental costs depending on the property type and location.
Business Rates Information for Tenants
Business rates are a property tax paid by the occupiers of most non-domestic properties in England and Wales. If you rent commercial premises, you will normally be responsible for paying business rates directly to the local authority unless the lease states otherwise.
Rates are calculated using two main components:
Business Rates Bill = Rateable Value × Multiplier
•Rateable Value (RV) — assessed by the Valuation Office Agency (VOA) based on the property’s estimated rental value.
•Multiplier (Uniform Business Rate) — set annually by the Government.
1. Current business rates multipliers (England 2025–2026)
Category | Multiplier |
Small Business Multiplier | 49.9p |
Standard Multiplier | 54.6p |
Wales and Scotland operate separate systems with their own multipliers.)
Multipliers change periodically, usually in line with inflation or government policy decisions.
Example Calculation
If a commercial property has a rateable value of £16,000:
Business Rates = £16,000 × 0.499
= £7,984 per year (before reliefs)
This provides a useful starting point when comparing properties.
2. Rateable value revaluations
Rateable values are periodically reassessed by the VOA to reflect changes in the rental market.
Recent revaluations:
- 2017 Revaluation
- 2023 Revaluation (current list)
Future revaluations are expected to occur more frequently to maintain accuracy.
Tenants should always check the current rateable value using the VOA website before committing to a lease.
3. Small business rates relief (SBRR)
Many tenants qualify for relief.
In England:
- Rateable value £12,000 or below → up to 100% relief (no rates payable)
- £12,001 to £15,000 → tapered relief
- £15,001 to £51,000 → small business multiplier may apply
Eligibility depends on whether you occupy only one property or multiple premises.
4. Retail, hospitality and leisure relief
Government support schemes have provided relief to certain sectors in recent years.
Where applicable, eligible businesses such as:
- Shops
- Restaurants and cafés
- Hospitality venues
- Leisure facilities
may receive temporary discounts (often up to 75% subject to caps). These schemes are reviewed periodically by government budgets.
Tenants should confirm current eligibility with their local authority.
5. Transitional relief
Transitional relief schemes are designed to limit sudden increases in business rates following revaluation.
If your property’s rateable value rises significantly, increases may be phased in gradually.
Local authorities apply this automatically where applicable.
6. Rural rate relief
Businesses located in qualifying rural areas (population under 3,000) may receive mandatory or discretionary relief.
Examples include:
- Sole village shops
- Post offices
- Public houses
- Petrol stations
Local authorities can increase relief up to 100% in some circumstances.
7. Exempt properties
Some properties are exempt from business rates, including:
- Agricultural land and buildings
- Places of public religious worship
- Buildings used for disability welfare or training
- Certain charitable properties
Eligibility depends on use and ownership.
8. Empty property rates
If you lease a property but leave it vacant, rates liability may still apply.
Typical rules:
- First 3 months → exemption for most properties
- Industrial buildings → up to 6 months exemption
- After exemption period → full rates payable
This is important when negotiating lease start dates or fit-out periods.
9. Challenging your rateable value
If you believe the rateable value is incorrect, you may challenge it through the VOA’s:
Check → Challenge → Appeal process.
Professional rating surveyors can assist and may reduce your liability significantly if the valuation is inaccurate.
Other Costs Linked to Business Rates
Tenants should also consider:
- Local authority service charges
- Waste collection costs
- BID (Business Improvement District) levies
- Supplementary rates in certain locations
These costs vary depending on the property location and lease structure.
How Business Rates Affect Leasing Decisions
Business rates can influence:
- Affordability of premises
- Lease negotiations
- Location choice
- Property size decisions
- Overall business viability
In some cases, landlords may offer rent concessions if business rates are particularly high relative to rental value.
Professional Advice
You may wish to seek advice from:
- Chartered surveyors
- Rating specialists
- Commercial agents
- Accountants
This can help ensure you understand the full financial commitment before signing a lease.
Summary
Business rates are a major ongoing cost when renting commercial property and should always be considered alongside rent, service charge and other occupational expenses. Liability is based on the property’s rateable value and the government multiplier, although various relief schemes may reduce the amount payable.
Tenants should research rates carefully, confirm eligibility for reliefs and consider professional advice where appropriate. With proper planning, business rates can be accurately budgeted and may even present opportunities for negotiation or savings through appeals.
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