The utterance of the words “business rates” can fill businesses with a certain sense of dread – albeit commercial landlords or tenants. Not only something else to pay out, but also, for many, something else to get their heads around. It is important, however, to understand them in order to accurately plan budgets and outgoings. This guide to business rates in England in 2026 will take commercial landlords and tenants through the current laws and responsibilities.
Here at Boxpod Commercial Property, we believe that it is important for commercial landlords to understand how business rates apply to their properties, regardless of whether they will pay them during a tenancy. Along with the other legal obligations for commercial landlords, being able to give this sort of information to tenants can make a big difference in getting the tenants that you want, as well as understanding the implications for when tenants leave the property. Likewise, for commercial tenants, this could be a significant expense that may have been overlooked.
What are Business Rates and How do They Work?
Business rates are an additional tax that businesses pay through their commercial unit, essentially a council tax for the occupation of commercial property. They are applicable to the majority of the different types of commercial properties in the UK, including shops and retail units, warehouses, workshops, offices, factories, and restaurants.
The money that is earnt from business rates is used to go back into the local area, contributing to the upkeep of the area, and providing local infrastructure and other council services. Although business rates are essential in ensuring a safe, clean, well-run local area, they can also be used by local government to help and encourage some businesses over others. For example, we have seen recent governmental changes to business rates to help hospitality venues that contribute to an area’s nightlife to stay afloat.
Business rates are continuing to be reviewed and evolve, so it is important that commercial property landlords and tenants keep on top of the latest changes.
How are Business Rates Calculated?
Business rates are calculated using the rateable value of the property and a multiplier. The calculation is essentially the rateable value (the estimated annual rent that can normally be achieved on that property) multiplied by the multiplier. The rateable value is determined by the Valuation Office Agency.
Business rates payable amount = Rateable value x multiplier
There are also some circumstances where transitional values, exemptions, or reliefs can be applied to bring the bill down.
Understanding this can be very useful to commercial landlords when listing their commercial property for rent so that they can give an idea to tenants of the expected business rates, but also to ensure that they have the right information as/when the property is vacated.
How is the Rateable Value Calculated?
For any business rates bill, the two main pieces of information that are needed are the rateable value and the multiplier value.
The rateable value, calculated by the Valuation Office Agency (VOA) (in England and Wales), is based on the commercial property’s rentable value on the open market. Their calculation into the ratable value of a commercial property can be calculated through several different methods. These include:
- The most common method is to look at other similar businesses in the area, operating out of a similar commercial property. They will combine this with other information such as the condition of the property, incentives, and lease terms.
- Used commonly in commercial properties where there is less obvious information about the local rents, and the property is there primarily to make a profit – cinemas, for example, the VOA will estimate the ‘fair maintainable trade of a reasonably efficient operator’ and then deduct anything that they feel is fair and necessary.
- For commercial properties that are not normally rented out and not used to make profits – schools and doctor’s surgeries, for example, the amount is based on a calculated cost to build the property from scratch today – deducting for age and the condition of the building and then applying a ‘decapitalisation’ rate.
Commercial properties are usually re-evaluated every three years so that they can reflect any changes in the properties. The last evaluation was in April this year (2026).
What is a Multiplier and How is it Calculated?
The other element to the business rates calculation is the multiplier – or Uniform Business Rate (UBR). There used to be two basic multiplier rates:
- The small business multiplier – a rate set for businesses with a rateable value below a certain level
- The standard multiplier – a rate set for businesses with a rateable value above a certain level
However, after the 2026 review, and the need recognised by the government to support businesses in the retail, hospitality, and leisure sector, there are now five multiplier rates:
| Multiplier | Rateable Value | Multiplier Rate (pence/pound) |
| Small Business R, H, L | Under £51,000 | 38.2p |
| Small Business General | Under £51,000 | 43.2p |
| Standard Business R, H, L | £51,000 - £499,000 | 43p |
| Standard Business General | £51,000 - £499,000 | 48p |
| High Value Multiplier | £500,000 or over | 50.8p |
(Rates for England 2026-7)
Therefore, using the calculation above, the business rate bill for a small business in the retail, hospitality, or leisure sector with a rateable value of £40,000 would be:
Business rates payable amount = Rateable value x multiplier
Business rate bill = 40,000 x 0.382 = £15,280
Business Rates Relief
Commercial property tenants also have the possibility of getting other business rates relief, which are in place to help to support local economies and businesses in sectors that might be struggling for whatever reason.
Some of these are specific to the business and/or their activities – for example, there is a Small Business Rates Relief (SBRR), whereby small businesses meeting certain criteria, such as certain rateable value and the number of properties that the business works from, etc are assessed and can be awarded SBRR.
Other reliefs can be more generic and useful for commercial landlords to point out to tenants if they are not aware of them – such as the Rural Rate Relief and Transitional Relief – created to alleviate the impact of big rate rises following a new valuation, for example.
Who is Responsible for Paying Business Rates?
When it comes to the payment of business rates, the ultimate responsibility is on the commercial property landlord. However, landlords are able to stipulate in their rental agreement that the tenant must pay the business rates for the property.
When a tenant leaves the commercial property, however, the responsibility for the payment of business rates returns to the landlord.
When a commercial property is empty, what happens to the business rates?
When a tenant leaves the commercial property, the landlord is responsible for paying the business rates; however, there is usually an amount of relief available to them.
Business rates are not applicable immediately, but this is, in most cases, time limited. Most empty properties have a period of three months' relief from business rates, although industrial units (such as factories, warehouses, and workshops) have a period of six months.
After this period, the empty property rate is charged to the commercial landlord. This is in place to encourage landlords to find new tenants for their commercial unit. It is essential that landlords are aware of when their empty property relief runs out, as the cost can be significant – the charge is the same as the original business rates.
There are some circumstances that can make the property exempt from the empty property business rates. These include if the property is listed, if the landlord/company is in administration or liquidation, if the rateable value is below £2,800, for sports clubs, for some buildings used for charities, or if occupation of the property has been prohibited by law or a public authority.
These are not automatic, however. The landlord must contact the local council in order to make their case in order to be granted the exemption.
Do Empty Property Rates apply when refurbishing or being sold?
When a property is being refurbished or redeveloped, and it is impossible to rent the commercial property, it can be taken off the VOA list, and business rates are not applied. Again, this is not automatic, and commercial landlords would need to apply to the VOA, with evidence of the work that they are carrying out.
It is also important for commercial landlords to note that to ‘reset’ the unoccupied period, a tenant must stay in the property for a minimum of 13 continuous weeks.
Do you have a commercial property that you are looking to fill? Are your current tenants leaving soon – or have they already left? List your property with us here at Boxpod from just £12/month, with no agents and no middleman.
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