Commercial properties in the UK do not fall under the residential council tax system. Instead, they are subject to business rates, the official term for what is commonly referred to as council tax on commercial property. These are a form of local taxation applied to non-domestic properties including shops, offices, warehouses, factories, restaurants, hotels, and guest houses .
What Are Business Rates and Who Pays Them?
Business rates are charged by local councils on the occupation of non-domestic properties in England, Wales, Scotland, and Northern Ireland. In most cases, the occupier of the commercial property is responsible for paying the bill. If a commercial property is empty, the responsibility for business rates typically falls to the property owner . Local councils issue business rates bills annually, usually in February or March for the upcoming tax year, and payment can typically be spread over ten or twelve monthly instalments
How Business Rates Are Calculated
Business rates are calculated using a formula based on two figures: the rateable value of the property and the multiplier set by central government each year.
Rateable Value
The rateable value represents the estimated open market annual rental value of the property, assessed and assigned by the Valuation Office Agency (VOA), which considers factors including location, size, quality, and earning potential . Current rateable values are based on rental market conditions as of 1 April 2021. The next revaluation took effect on 1 April 2026, based on rental values as of 1 April 2024.
The Multiplier
From 1 April 2026, England expanded to a five-tier multiplier system:
| Property Category | Rateable Value | Multiplier (2026/27) |
|---|---|---|
| Small business (non-RHL) | Under £51,000 | 43.2p |
| Standard (non-RHL) | £51,000 to £499,999 | 48.0p |
| Small business RHL | Under £51,000 | 38.2p |
| Standard RHL | £51,000 to £499,999 | 43.0p |
| High value | £500,000 and above | 50.8p |
As a worked example, a commercial office with a rateable value of £30,000 in 2026/27 would carry a gross bill of approximately £12,960 per year (£30,000 x 43.2p) before any reliefs.gov
Relief Schemes That Can Reduce Your Bill
Small Business Rate Relief
Businesses occupying a single property with a rateable value below £15,000 are eligible for small business rate relief. Properties with a rateable value of £12,000 or below receive 100% relief and pay nothing at all. For rateable values between £12,001 and £15,000, relief is tapered gradually from 100% down to 0%.
Retail, Hospitality and Leisure Relief
For 2025/26, eligible retail, hospitality, and leisure properties received a 40% discount on their business rates bill, capped at £110,000 per business. From April 2026, this targeted scheme ended and was replaced by the new permanently lower multipliers introduced for the sector.
Charitable and Discretionary Relief
Charities in occupation of commercial property for charitable purposes receive mandatory 80% relief. Local authorities have the discretion to top up this relief to 100%, potentially eliminating the bill entirely.
Transitional Relief
When a revaluation results in significant bill increases, transitional relief phases these in gradually. For 2026/27, annual increases are capped at 5% for properties with a rateable value up to £20,000, 15% for those between £20,001 and £100,000, and 30% for those above £100,000.
Enterprise Zone Relief
Businesses that start up in or relocate to a designated Enterprise Zone may receive up to 100% business rates relief for up to five years.
Empty Commercial Property Rates
Most commercial premises receive 100% empty property relief for the first three months of vacancy. Industrial and warehouse properties benefit from an extended six-month relief period. After the relief period expires, full business rates apply at the standard rate. A key change from 1 April 2024 requires that a property must be reoccupied for at least 13 weeks before a fresh empty property relief period can be triggered.
Certain empty properties qualify for ongoing exemption regardless of how long they remain vacant, including listed buildings, properties with a rateable value below £2,900, and properties held by a charity awaiting charitable use.
Exemptions and Exclusions
Certain categories of commercial property are permanently exempt from business rates. Exempt properties include agricultural land and buildings used for agricultural purposes (including fish farms), buildings used for the training or welfare of disabled people, and properties registered for public religious worship or church halls. It is advisable to confirm any claimed exemption with the local billing authority, as eligibility criteria may vary slightly between regions.
Working from Home and Home-Based Businesses
Where a home-based business uses only a small portion of a residential property for commercial purposes, business rates generally do not apply and the property remains subject only to residential council tax . However, if a part of the home is exclusively used for business, receives clients or employees on the premises, or is used for the sale of goods at the property, business rates may apply to that portion alongside the residential council tax. The VOA can assess a mixed-use property and split the liability between business rates and council tax accordingly .
Challenging Your Rateable Value
If a rateable value appears incorrect, commercial occupiers can challenge it through the VOA’s Check, Challenge, Appeal process. The process begins by checking the factual information the VOA holds about the property for accuracy. If the facts are correct but the valuation still appears too high, a formal challenge can be submitted with supporting evidence. If the challenge is unsuccessful, the matter can be appealed to the independent Valuation Tribunal. Appeals must be submitted within four months of the VOA’s challenge decision, and business rates must continue to be paid in full throughout the process.
How UK Property Tax Accountants Can Help
At UK Property Tax Accountants, we provide dedicated support to commercial property occupiers and owners navigating business rates and broader property tax obligations.
Business Rates Review and Planning: We review your existing rateable value and relief position to identify whether your bill is correct and whether any available relief has been missed or not yet applied.
Rateable Value Challenges: Where a rateable value appears disproportionate, we support clients through the Check, Challenge, Appeal process and coordinate with specialist rating surveyors on their behalf.
Empty Property Strategy: We advise commercial property owners on compliant strategies to manage business rates liability on vacant premises, including understanding the 13-week reset rule and exemption eligibility.
Relief Applications: From small business rate relief to enterprise zone relief and transitional relief, we ensure all applicable reliefs are applied to your account and applications are submitted correctly.
MTD and Record Keeping: As Making Tax Digital requirements expand, we help commercial property businesses maintain compliant records and submit quarterly updates through approved software.
Contact our team today for a no-obligation consultation.
Frequently Asked Questions
Q1. Is council tax payable on commercial properties in the UK?
No. Residential council tax does not apply to commercial properties. Instead, non-domestic properties are subject to business rates, calculated using the property’s rateable value and an annual multiplier set by central government.
Q2. Who is responsible for paying business rates on a commercial property?
In most cases, the occupier pays the business rates. If the property is empty, the responsibility passes to the owner. Commercial lease agreements sometimes vary this arrangement, so checking the lease terms carefully is essential .
Q3. How is the rateable value of my commercial property determined?
The VOA assesses rateable values based on the estimated annual open market rental value of the property, considering size, location, quality, and income-generating potential .
Q4. Can I appeal my commercial property’s rateable value?
Yes. Occupiers can use the VOA’s Check, Challenge, Appeal process. Business rates must continue to be paid during the appeal.
Q5. What is small business rate relief and how do I claim it?
Small business rate relief provides 100% relief for properties with a rateable value of £12,000 or less and tapered relief for those between £12,001 and £15,000. Apply directly through your local council.
