Business rates are one of the oldest UK taxes, which apply to all business premises in the UK. Even if you’re working from home, you could be liable for paying business rates on the part of your home which you use for your business – so they are an important aspect to get right.
Make sure that you don’t get caught out with our full guide on what are business rates in the UK, and how the latest budget update has impacted business rates.
Business rates explained
Business rates are a tax for business premises that are taken by the local council to pay for services such as police, fire and waste management. They work in the same manner as council tax, calculated based on the value of the property being taxed.
And in the same way as council taxes, business rates are billed as an annual amount that can be broken down into 10-month or 12-month instalments to help you split the cost.
Whether your business has to pay business rates depends on your business and properties.
If you have a property that’s used for business purposes (i.e. an office, a pub, a warehouse, a factory, a studio, etc.), then you will be liable to pay business rates.
There are some exceptions to this rule though, as some businesses will be able to apply for exemptions, and specific working from home businesses will be able to avoid the tax. We’ll cover both of these in more detail below.
2024 UK business rates and updates
Business rates are calculated by the Valuation Office Agency (VOA), which uses the ‘rateable value’ of Business rates are calculated by the Valuation Office Agency (VOA), which uses the ‘rateable value’ of your property value to calculate your rates. This figure is an estimate of how much it would cost to rent a property for a year.
Once they have this value, the VOA multiplies this figure by the chosen multiplier. There are two options here:
- The standard multiplier, which is used if the rateable value is over £51,000.
- The small business multiplier, which is used if the rateable value is under £51,000.
The multiplier rates are set each year. Currently, they are:
| Year | Standard multiplier | Small business multiplier |
| 2023 to 2024 | 54.6 pence (this will rise to 55.5 on April 1st 2025) | 49.9 pence (this rate will be frozen in 2025/2026). |
If your property is in Wales or London, different multipliers are used.
As an example, let’s say that Darren has built an extension to house a pottery studio for his business. The VOA estimates the rateable value of this property at £15,000.
Because this value is less than £51,000, Darren would use the small business multiplier. So:
- 13,000 multiplied by 0.499 = 6487
- Darren’s business rates would be £6,487 per year.
However, there are some exemptions or relief schemes that small businesses can apply for to help reduce this rate.
2024 budget update
Under the new labour government, there are plans to overhaul the business rates system to create “a fairer and more modern approach”. The Autumn Budget 2024 has announced intentions to:
- Extended Retail, Hospitality, and Leisure Relief (RHLR): This relief will continue for another year, but at a reduced rate of 40% from April 2025.
- Reduced Multiplier for Small Businesses: From April 2026, businesses in the retail, hospitality, and leisure sectors with a rateable value below £500,000 will benefit from a lower multiplier. This will be funded by an increased multiplier for larger businesses.
- Small Business Rates Multiplier Freeze: For the 2025-26 tax year, the small business rates multiplier will remain unchanged.
Over the long term, the government is also seeking ways to incentivise investment and growth, digitise the business rate process and introduce duty on ratepayers to provide property information.
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Business rates when working from home
When working from home, you will have to pay business rates if part of your home is exclusively used for business.
This means that if you run an online business where you sell goods from home, or if you work from your bedroom or kitchen and don’t entertain any clients, then you won’t have to pay business rates. Instead, you’ll pay council tax as normal.
However, if there’s a room that’s exclusively used for business – or if you entertain clients at home, i.e. if you’re a beautician or dog groomer, then you will be liable for business rates. This also applies if you have staff coming to your home to work.
Business rate relief schemes
Business rates are a massive overhead for businesses, particularly small businesses. Luckily, there are a lot of schemes and reliefs available to help make this tax bill smaller and easier to manage.
Business rates are a massive overhead for businesses, particularly small businesses. Luckily, there are a lot of schemes and reliefs available to help make this tax bill smaller and easier to manage.
Some of the main reliefs and exemptions are:
Small business rate exemptions
The small business rate exemption is available for businesses that only use one property with a rateable value of less than £15,000.
Those that have a rateable value of less than £12,000, won’t have to pay any business rates, while those with rateable values between £12,001 to £15,000 pay a much lower rate.
Using the example of Darren’s pottery studio from earlier, this exemption would mean he paid a much lower rate, so he didn’t have to pay the full £6,487 a year. If his studio had a rateable value of £10,000, he wouldn’t have to pay anything.
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Charitable rate relief
If you are a local charity or community amateur sports club, you could get an 80% reduction in business rates. Just bear in mind, you cannot get both charitable rate relief and small business rate relief at the same time.
Transitional relief
This relief rate is available for those that have had business rates go up or down by more than a certain amount. This means that any major changes are phased in slowly so you don’t have to pay the full increase at once.
If your bill is increasing from 1 April 2023
| Rateable value | 2023 to 2024 | 2024 to 2025 | 2025 to 2026 |
| Up to £20,000 (£28,000 in London) | 5% | 10% plus inflation | 25% plus inflation |
| £20,001 (£28,001 in London) to £100,000 | 15% | 25% plus inflation | 40% plus inflation |
| Over £100,000 | 30% | 40% plus inflation | 55% plus inflation |
Enterprise zones
Enterprise zones are areas that the government are actively trying to encourage businesses to move into – which means that they might provide better relief on business rates to make the area more attractive.
This relief is calculated by the council, and could be worth up to £55,000 over 5 years.
Retail, hospitality and leisure relief
You could qualify for retail, hospitality and leisure relief if your business is mainly being used as a:
- shop
- restaurant, café, bar or pub
- cinema or music venue
- hospitality or leisure business – for example, a gym, a spa or a hotel
Qualifying for this relief depends on the local council that you are in. If you’re eligible, you could get 75% off your business rates bills for the 2024 to 2025 billing year (up to a maximum of £110,000).
2024 update: The retail, hospitality and leisure relief is planned to continue for another year, but at a reduced rate of 40% from April 2025.
Business rates and council tax
Both business rates and council tax are calculated in the same manner, with the annual value you pay depending on the value of your property. The main difference between the two taxes is what properties you pay for.
- Council tax is exclusively for domestic properties, i.e. your home.
- Business rates are for properties that are used for your business.
If you work from home, you may be liable for paying both business rates and council tax, depending on your business and how much of your home space is dedicated to your business.
If a property is solely used for business, you will pay business rates instead of council tax.
However, if you work from home, you will still need to pay council tax on your property – and pay business tax on the proportion that you use for your business. I.e. if you have converted your garage into a photography studio, you will be eligible for business rates on this section of your home.
If you don’t have a dedicated space, i.e. you work from your kitchen and don’t see any clients inside your home, you will only have to pay council tax.
If you have a home you let out for your business for more than 20 weeks a year, this will be classed as a self-catering holiday let and must pay business rates rather than council tax.
Paying your business rates
Like council tax, you will be sent an annual bill for your business rates in February or March every year. Then, you can pay the full amount in one go or through smaller 10-month instalments.
If you think that your business rates are incorrect or are using an unfair rateable value, then you can appeal to Valuation Tribunal Service for a re-evaluation.
It may also be worth speaking to an accountant or financial advisor for them too, to see if there are any relief schemes that you could apply for to reduce your business rates.
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Business rates in a nutshell
Business rates are a tax for business properties that fund local services such as the police, ambulance and fire services. They are calculated based on the rateable value of your property, which is an estimate of how much that property would be to rent for one year.
If you work from home and don’t have a dedicated space for your business – then you might be exempt from paying business rates. Similarly, most small businesses can apply for reliefs that will either give them exemptions or reduce this bill dramatically.
For more advice on business rates, we’d always recommend speaking to an accountant or financial advisor to ensure that you pay the best rates available for your business.
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