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 RatesCalcPro 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

Calculate Your Business Rates: Step-by-Step Guide