A picture framer takes a small unit on a back street. The rateable value is £10,750. She budgets for rates at roughly half of that, because somebody told her the multiplier is about 50p in the pound, and she sets aside £450 a month.
She could have been paying nothing. Her rateable value is below £12,000, her unit is her only property, and she qualifies for 100% small business rate relief in England. Councils are not universally good at applying it automatically, and a business that never applies can pay for years.
Rateable value is a rent, estimated on a fixed date
Business rates, formally non-domestic rates, are charged on most non-domestic property. The bill is broadly the rateable value multiplied by a multiplier set by government, less any reliefs.
Rateable value is set by the Valuation Office Agency, and it is an estimate of the annual rent the property would let for on the open market at a fixed valuation date, on standard terms. It is not what you pay. If you negotiated a good deal, your rateable value may sit above your actual rent, and vice versa.
Values are reassessed at a revaluation. The rating list that took effect on 1 April 2023 was based on rental values as at 1 April 2021. The next revaluation takes effect from 1 April 2026, based on values as at 1 April 2024, and the intention set out in the Non-Domestic Rating Act 2023 is to move to three-yearly revaluations rather than the longer gaps of the past.
Multipliers are set each year and there are two in England, a standard multiplier and a lower small business multiplier. Because they are reset annually, treat any figure you are quoted as this year's figure.
Business rates are devolved. Scotland, Wales and Northern Ireland run their own systems with their own reliefs and their own valuation bodies, so English thresholds do not transfer.
The relief thresholds are worth knowing precisely
In England, small business rate relief works on rateable value bands:
- Rateable value of £12,000 or less: 100% relief. You pay nothing.
- Rateable value between £12,001 and £15,000: relief tapers on a sliding scale from 100% down to 0%.
- Rateable value up to £51,000: you are billed using the lower small business multiplier even where no percentage relief applies.
The general rule is that relief applies where you occupy a single property. You can usually keep relief on your main property if your other properties each have a rateable value below £2,900 and the total across all of them stays under a stated limit. Take on a second significant property and you can lose the relief entirely, which makes the second site more expensive than its own rates bill suggests.
There are other reliefs that people miss. Rural rate relief for the sole shop, post office, pub or petrol station in a qualifying rural settlement. Charitable rate relief at 80%, with discretionary top-up. Retail, hospitality and leisure relief, which has run at varying percentages and caps in recent years and is confirmed annually rather than being permanent. Empty property relief, generally three months for most property and six for industrial, after which full rates usually become payable by the owner. Hardship relief, which is discretionary and rarely publicised.
Apply to the billing authority, which is your local council, not the Valuation Office Agency. Reliefs are not always applied automatically and it costs nothing to ask. Relief can usually be backdated, though the rules on how far vary by relief and by council, so ask for the earliest date you were eligible.
Improvements and empty units are treated oddly
Two quirks are worth planning around.
First, improving a property historically increased its rateable value and therefore its bill, which discouraged investment. An improvement relief was introduced to give a period during which qualifying improvements do not increase the bill for the occupier who made them. Conditions apply and it is not automatic in effect, so check before you commit to a fit-out that adds floorspace.
Second, an empty unit still costs. After the initial exempt period, the owner pays. If you hold a lease on premises you have vacated, you are the one paying, which is a cost people forget when they plan a move and keep the old unit for a transition period.
Challenging a valuation is a defined process
If you believe your rateable value is wrong, you can challenge it through the Check, Challenge, Appeal process operated by the Valuation Office Agency in England.
Check is the first stage: you confirm or correct the factual details the valuation is based on, such as floor areas, the layout, and what the space is used for. A surprising number of valuations rest on measurements taken years ago or on a layout that no longer exists. Getting the facts right sometimes resolves it without going further.
Challenge is the substantive stage: you argue that the valuation is wrong, with evidence, usually rental evidence from comparable properties around the valuation date. There are time limits and the process requires you to set out your case properly rather than simply asserting the figure is too high.
Appeal goes to the Valuation Tribunal for England if you are not satisfied with the outcome of a challenge, and there is a fee.
Material change of circumstances is a separate route. If something external and physical has changed, for instance long-term roadworks blocking access, you may be able to seek a reduction. The scope of what counts was narrowed by legislation after the pandemic, so take advice before spending money on a claim.
Two cautions. Rates are payable while a challenge is outstanding, so do not withhold payment. And be wary of unsolicited approaches from firms offering to reduce your rates for a percentage of the saving. Some are competent, many are not, and the Royal Institution of Chartered Surveyors keeps a searchable register of regulated firms. You can do a Check yourself for nothing.
Where this shows up in the game
Business Baron charges rates on every property you occupy, based on a rateable value that responds to where the unit is and what it is. Taking a second site can push you out of small business rate relief, which makes expansion cost more than the new rent alone. Players who never look at the rates line tend to notice it the year they open their third shop. The relief threshold is one of the first things that makes a cheap unit genuinely cheap.