What are business rates? The latest updates for small businesses in 2025

Running your own business is an incredibly rewarding experience, giving you the freedom to be your own boss and shape your future. But let’s be honest — there’s a lot to keep on top of. From working out taxes to setting up payroll, the admin side of things can sometimes feel overwhelming.

One of those responsibilities is business rates. And with new changes brought in from April 2025, understanding what they mean for your business is more important than ever.

So, to take one thing off your plate, we’ll break down everything you need to know about business rates, including how they’re calculated, what reliefs are available, and the latest updates for 2025.

What are business rates?

Business rates, also known as non-domestic rates, are a tax applied to properties used for business purposes. They’re set by the UK government, collected by local councils, and must be paid by anyone responsible for commercial properties. The money collected goes towards funding essential public sectors like schools, emergency services, and local communities.

Business rates are applied to nearly all non-domestic properties, including:

• Shops
• Offices
• Pubs and restaurants
• Factories and warehouses
• Holiday rental homes

Your business rates bill is calculated based on your property’s rateable value (RV) — this is its estimated market rental value, determined by the Valuation Office Agency (VOA) and reviewed every three years. A multiplier, set by the government and reviewed yearly, is then applied to a property’s RV to determine how much is owed in business rates.

What’s changing in 2025?

From April 2025, new changes affect how business rates are applied, particularly for small businesses, retail, hospitality, and leisure (RHL) properties. Here’s a summary of business rates for the 2025/26 tax year:

• Relief for RHL businesses in 2025/26 is decreasing from 75% to 40% (up to a cash cap of £110,000 per business)
• The small business multiplier will stay frozen in 2025/26, protecting smaller businesses from inflation-linked increases

These changes are part of a wider government plan to support high-street businesses and create a fairer tax system. For example, the government intends to fund the relief for retail, hospitality, and leisure businesses by asking businesses with properties with RVs over £500,000 to contribute more via higher business rate multipliers (however, this won’t come into effect until 2026/27).

How are business rates calculated?

Understanding how business rates are worked out might seem complicated, but once you break it down, it’s pretty straightforward.

Here’s everything you need to know about rateable values, multipliers, reliefs, and how to check what you owe.

1. Find your property's Rateable Value (RV)

Your rateable value (RV) is an estimate of how much rent your property could generate per year on the open market. To find the VOA’s estimation of your RV, you can use the gov.uk’s checker here.

2. Apply the business rates multiplier

Once you know your RV, you’ll need to multiply it by the business rates multiplier. There are two types: the standard multiplier and the small business multiplier. The correct one to use is also dependent on your RV.

For the 2025/26 tax year, the multipliers for properties in England are:

• Standard multiplier (RV of £51,000 or more): 55.5p
• Small business multiplier (RV below £51,000): 49.9p

The small business multiplier will stay the same as the last few years, helping to keep costs stable for smaller businesses, while the standard multiplier has increased from 54.6p.

Here’s a breakdown of the multipliers for the last few financial years.

Year	Standard multiplier	Small business multiplier
2025 to 2026	55.5p	49.9p
2024 to 2025	54.6p	49.9p
2023 to 2024	51.2p	49.9p
2022 to 2023	51.2p	49.9p
2021 to 2022	51.2p	49.9p
2020 to 2021	51.2p	49.9p
2019 to 2020	50.4p	49.1p
2018 to 2019	49.3p	48.0p

*Figures obtained from gov.uk and the Autumn Statement 2024.

3. Work out your estimated business rates

Now, you’re armed with all the numbers. To work out your business’s estimated business rates tax bill, multiply your rateable value by your multiplier. 

Rateable Value (RV) × Multiplier = estimated business rates

Let’s say you run a small café with a rateable value of £20,000 in the 2025/26 tax year. Since it qualifies for the small business multiplier (49.9p per £1 RV), your calculation would be:

Rateable Value = £20,000

Small business multiplier = £0.499

£20,000 × 0.499 = £9,980 per year (your estimated basic business rate)

The figure you come up with will give you a rough idea, but remember, many businesses qualify for relief schemes, which can significantly reduce costs. For more information about relief you could be eligible for, keep on reading.

Important: if your business is in the City of London, Wales, Scotland, or Northern Ireland, you’ll need to use a different process.

• City of London — The City of London sets its own multiplier, which is typically slightly higher than the national rate.
• Wales — Business rates are calculated using separate Welsh Government multipliers, which differ from England’s rates.
• Scotland — Scotland has its own poundage rate (multiplier) and different relief schemes.
• Northern Ireland — Business rates are handled by Land & Property Services (LPS) and include a regional rate + district rate set by local councils.

Business rates by industry

Not all businesses are assessed in the same way when it comes to business rates. Some industries have specific methods for calculating their rates, which can make things a little more complex. 

Here’s a breakdown of how rates work for different sectors.

Pubs & licensed premises

Business rates aren’t calculated purely on rateable value for pubs, bars, and licensed premises. 

Instead, the Valuation Office Agency uses a system called Fair Maintainable Trade (FMT) which takes into account:

• The type of pub or venue (e.g., independent, chain, nightclub, gastro pub)
• Its location (busy city centre vs rural village)
• The services it offers (e.g., food, gaming machines, live sports)
• Expected annual turnover (excluding VAT)

For example, a small local pub with an estimated annual turnover of £150,000 will typically have a lower business rates bill than a large city bar with a £1 million+ turnover, even if their physical sizes are similar.

That’s not all; the VOA also examines rents and turnovers when discerning the fair maintainable trade figure and then applies a percentage to create the rateable value.

You can learn more about how pubs are valued here.

Self-catering & holiday let accommodation

Suppose you rent out a property as a holiday let. In that case, it may be rated as a ‘self-catering property' and subject to business rates instead of council tax — but only if it’s available for short-term letting for 140 days or more per tax year.

The VOA calculates business rates for holiday lets based on:

• Size and type of property (e.g., cottage, apartment, lodge).
• Location (high-demand areas may have higher RVs)
• Likely rental income

Check if your holiday let qualifies for business rates here.

Working from home 

If you're solely using your home for work purposes and it remains primarily a residential property, you're generally not required to pay business rates. However, there are exceptions:

• Business use – If you've converted part of your home exclusively for business use, such as a dedicated office for visiting clients or a salon, you may be liable for business rates on that portion of your property.
• Non-domestic activities – Engaging in certain non-domestic activities from your home, such as manufacturing and storing goods for sale or having customers visit your property for your service – like if you’re a beauty therapist – could make you liable to pay business rates.

If you’re unsure, your local council can confirm whether you should pay business rates or council tax.

Factories, warehouses & industrial units

For factories, warehouses, and manufacturing sites, business rates are calculated mainly on floor space rather than expected trade.

From April 2026, properties with an RV of £500,000 or more will be subject to a higher business rates multiplier. This is expected to impact large distribution centres and warehouses used by online retailers.

Shops & retail businesses

Retail businesses are assessed in the same way as other commercial properties, based on their rateable value.

The latest updates that retail businesses should be aware of in 2025 are:

• 40% off business rates in 2025/26 (Retail, Hospitality & Leisure Relief)
• Small business multiplier will remain frozen for 2025/26
• From 2026, permanently lower multipliers will be brought in for retail properties with an RV under £500,000.

Do all businesses have to pay business rates?

While most commercial properties are subject to business rates, there are some exemptions and relief schemes that could reduce or eliminate your bill.

Here are some examples of properties that are exempt from business rates:

• Agricultural land and buildings (e.g., farms, forestry buildings)
• Buildings used for charitable purposes (e.g., charity shops, non-profit organisations)
• Places of religious worship
• Unoccupied properties with an RV below £2,900
• Buildings used for the training or welfare of disabled people.

What business rate relief schemes are there for small businesses in 2025?

Some properties may also be eligible for relief schemes, which are designed to help eligible businesses reduce their tax burden, making it easier to manage costs and support growth. These are typically based on factors like property usage, location, or the sector in which the business operates.

Several types of relief are available, some of which have been updated for 2025.

Some examples of business rate reliefs are:

• Small Business Rate Relief (SBRR) – If your RV is £12,000 or less, you pay nothing. If it’s between £12,001 and £15,000, you can receive partial relief on a sliding scale (where the relief is variable based on your RV).
• Retail, Hospitality & Leisure (RHL) Relief – If you own a shop, café, restaurant, pub, or hotel, you’ll benefit from 40% off your business rates bill in 2025/26. This is capped at £110,000 per business.
• Empty Property Relief – If a commercial property becomes vacant, business rates may not be payable for a limited period. Most properties qualify for three months of relief, while industrial and warehouse properties can receive six months. After this period, full business rates apply unless an exemption is granted. 
• Rural Rate Relief — Businesses in rural areas with a population of 3,000 or less may be eligible for 100% relief if they are the only:
• Shop or post office in the area with an RV of £8,500 or less
• Pub or petrol station in the area with an RV of £12,500 or less
• Transitional Relief — If a property’s rateable value increases significantly after a revaluation, transitional relief caps how much the bill can increase each year. It doesn’t mean you won’t need to pay a higher rate, but instead, it means the change will be phased into your bill gradually until you pay the full amount outlined in the revaluation, so you’re not hit with a big hike all in one go. Local councils automatically apply this relief if a company meets the eligibility criteria.
• Enterprise Zones — Businesses located within Enterprise Zones may be eligible for discounted business rates or other incentives to encourage investment and economic growth. 
• Charitable Rate Relief —Charities using their premises for charitable purposes can receive up to 80% off their business rates bill.

Business rates relief is subtracted from your business rates figure.

Using the same £20,000 RV café example, here’s what applying 40% retail, hospitality, and leisure relief will look like:

£9,980 – 40% (£3,992) = £5,988 per year

How to pay your business rates bill

In England, you must pay your business rates directly to your local council. They will issue a business rates bill annually for the coming tax year, usually in February or March. 

Businesses can pay using one of the following methods:

• Online — Most councils allow you to pay online via their website using a debit or credit card.
• BACS/Direct debit — The easiest way to ensure your payments are made on time is by setting up a BACs payment or direct debit through your local council’s online portal.
• By phone — Some councils accept phone payments, and you can call up to pay. Just make sure you have your payment card details and business rates account reference number to hand.
• At the Post Office or PayPoint — If your council allows it, you may be able to pay in person at selected Post Offices or PayPoint locations.

What happens if you don’t pay on time?

If you miss a payment, your local council will issue a reminder notice to bring your account up to date. 

Failing to pay within this timeframe could result in losing your right to pay in instalments, meaning the full outstanding balance will become due immediately. Continued non-payment may lead to further enforcement action to recover the owed money, such as a court summons, liability orders, or the involvement of enforcement agents to recover the debt. 

If you’re struggling to keep up with your business rates payments, it’s always best to contact your local council as soon as possible to discuss your options, as the penalties could set you back further.

FAQs

Do I have to pay business rates if I work from home?

If you run a business from home, you might not need to pay business rates — but it depends on how you use your property. In most cases, if your home remains primarily residential, you’ll pay council tax rather than business rates.

However, you may be liable for business rates if:

• You use a specific part of your home exclusively for business (e.g., a converted office, beauty salon, or workshop)
• You see clients or customers at your home regularly (e.g., personal trainers, hairdressers, therapists)
• You store large amounts of stock or equipment that go beyond normal household use
• Your home has been adapted for business use, such as installing a separate entrance or signage.

What do I do if my business changes premises?

If your business moves location or your premises change in any way, your business rates bill could be affected. You should inform the VOA if:

• You move to a new business premises
• You change or extend your current premises (e.g., adding a new floor or expanding into another unit)
• You sublet part of your property to another business
• You merge two or more properties into one
• Your property is no longer being used for business purposes

You must update your information with the VOA as soon as possible to avoid unexpected charges or backdated increases. Failing to notify the VOA could result in a backdated bill, meaning you might have to pay more than expected.

Can I appeal my business rates bill?

If you think your business rates have been unfairly assessed, you have the right to challenge them. Appeals can be made if you suspect: 

• Your rateable value is too high compared to similar properties
• Your property’s size, use, or condition has changed since the last valuation
• There are errors in your property’s details recorded by the Valuation Office Agency
• Your local area has experienced significant economic changes, impacting property values

If you notice an error, submit an official challenge request for a correction through the VOA website.

The key takeaways about business rates for small businesses

Business rates and relief are reviewed and updated regularly, so staying informed about them can help small businesses and startups make the most of available relief schemes and avoid unexpected costs.

For more small business insights and guidance, visit our blog.

Jodie Wilkinson

Head of Strategic Partnerships