How Is Rateable Value Calculated For Business Rates

Calculate your rateable value and estimated business rates based on your property details and location in England or Wales.

How Is Rateable Value Calculated for Business Rates? (2024 Expert Guide)

Business rates (or non-domestic rates) represent a significant overhead for UK businesses, with calculations based primarily on your property’s rateable value. This comprehensive guide explains how the Valuation Office Agency (VOA) determines rateable values, how business rates are calculated from that figure, and what reliefs may apply to reduce your bill.

1. What Is Rateable Value?

Rateable value is the VOA’s assessment of your property’s annual open market rental value on a specific valuation date, assuming:

• The property is vacant and to let
• The tenant pays all usual costs (excluding business rates)
• The lease terms are standard for that property type
• The valuation date for the 2023 rating list is 1 April 2021

This figure forms the foundation for calculating your business rates bill. The VOA reassesses rateable values every 3-5 years during a revaluation (most recently in 2023).

2. How the VOA Calculates Rateable Value

The VOA uses one of five primary valuation methods, depending on property type:

Valuation Method	Property Types	Key Factors
Comparable Method	Shops, offices, warehouses	Rental evidence from similar properties in the area
Receipts & Expenditure	Pubs, hotels, restaurants	Turnover minus operating costs (adjusted for fair maintainable trade)
Contractor’s Method	Specialist properties (e.g., petrol stations)	Rebuilding cost minus depreciation
Profit Method	Leisure facilities, care homes	Based on maintainable profits
Cost Rent Method	New or unique properties	Construction cost plus developer’s profit

3. From Rateable Value to Business Rates Bill

Once the VOA sets your rateable value, your local council calculates your bill using this formula:

Business Rates = (Rateable Value × Multiplier) − Reliefs

2023/24 Multipliers:

• Standard multiplier: 0.512 (for properties with RV ≥ £51,000)
• Small business multiplier: 0.499 (for properties with RV < £51,000)

For example, a shop with a rateable value of £20,000 in 2023/24 would calculate as:

£20,000 × 0.499 = £9,980 (before reliefs)

4. Key Factors Affecting Rateable Value

The VOA considers these primary factors when assessing your property:

Factor	Impact on Rateable Value	Example
Location	Prime locations command higher rents	Oxford Street vs. small town high street
Size	Larger properties = higher RV (but not always linear)	1,000 sq ft office vs. 10,000 sq ft warehouse
Property Condition	Modern, well-maintained properties valued higher	Recently refurbished vs. dated interior
Access & Parking	Good transport links and parking increase value	City centre with underground access vs. suburban
Local Economy	Strong local economy = higher rental demand	Tech hub vs. declining industrial area

5. Business Rates Reliefs (2024)

Several relief schemes can reduce your bill:

1. Small Business Rate Relief (SBRR):
   • 100% relief for properties with RV ≤ £12,000
   • Tapering relief for RVs between £12,001-£15,000
   • Businesses with multiple properties may qualify if total RV < £20,000 (£28,000 in London)
2. Retail, Hospitality and Leisure Relief:
   • 75% relief for eligible properties (ups to £110,000 per business) in 2023/24
   • Covers shops, restaurants, pubs, gyms, and hotels
3. Transitional Relief:
   • Phases in large increases/decreases after revaluation
   • Caps annual increases to 5-15% depending on property size
4. Rural Rate Relief:
   • 100% relief for sole village shops/post offices (RV ≤ £8,500)
   • 50% relief for other rural businesses (RV ≤ £12,500)
5. Charitable Relief:
   • 80% mandatory relief for registered charities
   • Local councils can top up to 100%

6. How to Check and Challenge Your Rateable Value

You can verify and dispute your rateable value through these steps:

1. Check your current valuation: Use the GOV.UK business rates service to find your property’s details.
2. Compare with similar properties: Search for comparable properties in your area using the VOA’s valuation search.
3. Gather evidence: Collect rental data, photos, and surveyor reports if you believe your valuation is incorrect.
4. Submit a “Check”: The first step in the appeal process is to submit a “Check” via the GOV.UK portal to verify the facts about your property.
5. Challenge if needed: If the Check doesn’t resolve the issue, you can formally challenge the valuation. Deadlines apply (typically 4 months from the Check decision).

Note: The VOA reports that 60% of challenges result in no change to the rateable value, while 25% lead to reductions and 15% to increases (2022 data).

7. Recent Changes and Future Outlook

The 2023 revaluation (based on 1 April 2021 rental values) brought several important changes:

• Overall RV increase: Total rateable value across England rose by 7.1% (£2.5 billion) due to inflation and property market changes.
• Regional variations: London saw the largest increases (+12.3%), while the North East had the smallest (+1.9%).
• Sector shifts: Industrial properties saw RV increases of 27.1% on average, while retail decreased by 10.3%.
• Transitional relief extended: The scheme continues to phase in changes over 3 years for large increases.

Looking ahead, the next revaluation is scheduled for 2026, with the valuation date set at 1 April 2024. The government has committed to more frequent 3-yearly revaluations from 2026 onward to better reflect market conditions.

8. Practical Tips for Managing Business Rates

1. Monitor revaluation dates: Mark 1 April 2024 in your calendar for the next valuation snapshot date.
2. Review relief eligibility annually: Your circumstances (or local council policies) may change year-to-year.
3. Consider property adaptations: Energy-efficient improvements may qualify for temporary relief (e.g., 100% relief for eligible heat networks).
4. Explore payment plans: Most councils offer 10-12 month instalment plans to spread costs.
5. Consult a rating surveyor: For complex properties or large portfolios, professional advice can identify savings. The Royal Institution of Chartered Surveyors (RICS) maintains a directory of qualified professionals.

9. Common Misconceptions About Rateable Value

Avoid these frequent misunderstandings:

• “Rateable value equals my actual rent”: RV is based on estimated open market rent, not your current lease terms.
• “Only large businesses pay business rates”: Even home-based businesses with dedicated workspaces may be liable.
• “Empty properties don’t pay rates”: Empty properties receive 100% relief for only 3 months (6 months for industrial/warehouse).
• “Rateable value changes annually”: It only updates at revaluation (every 3-5 years) unless you successfully challenge it.
• “Reliefs apply automatically”: You must apply for most relief schemes through your local council.

10. Business Rates vs. Council Tax: Key Differences

Feature	Business Rates	Council Tax
Purpose	Funds local services for business properties	Funds local services for domestic properties
Calculation Basis	Rateable value × multiplier	Property band × local council rate
Valuation Frequency	Every 3-5 years (revaluation)	Every 4 years (England) or as determined by devolved governments
Reliefs Available	SBRR, retail relief, charitable relief, etc.	Single person discount, student exemption, etc.
Empty Property Rules	100% relief for 3-6 months, then full rates	100% discount for empty homes (varies by council)
Appeal Process	Check → Challenge → Appeal (to Valuation Tribunal)	Challenge to Valuation Office (different process)

11. Expert Resources and Further Reading

For authoritative information, consult these official sources:

• GOV.UK: Introduction to Business Rates – Official government guide covering all aspects of business rates.
• Valuation Office Agency (VOA) – The body responsible for setting rateable values, with detailed valuation guidance.
• Local Government Association: Business Rates – Information on how councils administer business rates and relief schemes.
• RICS Valuation Standards – Professional standards for property valuation, including rateable value assessments.

For complex cases, consider consulting a rating surveyor accredited by the Institute of Revenues Rating and Valuation (IRRV). Their expertise can be particularly valuable for:

• Properties with unique features or mixed use
• Portfolios with multiple properties
• Disputes involving significant financial stakes
• Properties affected by major local developments