What SMEs Need to Know
Whether you’re renting an office, a workshop, or a storage unit, business rates are one of those costs that catches new tenants out. Here’s what they are, roughly what you’ll pay, and how to make sure you’re not handing over more than you need to — whether you run a limited company or trade as a sole trader.
What business rates actually are
Business rates are a tax on non-domestic property, collected by your local council. If you occupy a commercial premises — office, workshop, storage unit, shop, anything that isn’t a home — you’re likely on the hook for them, whether you own the freehold or you’re renting.
Worth getting straight from the start: business rates are attached to the property, not the business inside it. A sole trader and a limited company doing the exact same thing, in the exact same building, pay the exact same rates. Your legal structure doesn’t change the bill — it just changes whose name is on it (more on that further down).
How the bill is worked out
Two numbers do the job:
- Rateable Value (RV) — the VOA’s estimate of what your property would rent for on the open market. These were refreshed on 1 April 2026 using 2024 rental data, so plenty of premises will have a different RV even if nothing physically changed.
- The multiplier — a pence-in-the-pound rate set annually by government.
For 2026/27: the standard multiplier is 48p (RV £51,000–£499,999), a lower small business multiplier of 43.2p applies under £51,000, and a higher 50.8p multiplier kicks in above £500,000.
Example: a workshop with an RV of £18,000 falls under the £51,000 threshold, so it gets the 43.2p multiplier: £18,000 × 0.432 = £7,776 before any relief.
Reliefs worth checking for
This is where the real savings sit — reliefs can knock a bill down substantially, sometimes to zero, but nothing here applies itself automatically in every case. Worth checking rather than assuming your council’s already sorted it.
One thing worth being clear on before the detail: relief is always a discount applied to your calculated bill (RV × multiplier), not to the RV itself. Your RV only comes back into play to decide whether you qualify, and for SBRR, how much of a discount you get. So it’s a two-step process — work out the bill first, then apply the relief percentage to that figure.
Small Business Rate Relief (SBRR)
The big one for smaller premises. In England, an RV of £12,000 or less gets 100% relief — no bill at all. Between £12,001 and £15,000, relief tapers down from 100% to 0%, with your exact RV within that band deciding what percentage you get. Above £15,000, no SBRR, though you may still get the lower small business multiplier if your RV is under £51,000. Scotland and Wales run their own similar-but-different schemes, so check local figures if you’re outside England.
Example: a small office with an RV of £11,000 pays nothing at all under SBRR — its RV is under the £12,000 cut-off. Push that up to £13,500 (say, after a rent review) and it drops into the taper. Say the calculated bill at that RV is £5,832 (£13,500 × 43.2p) — because £13,500 sits roughly halfway through the £12,001–£15,000 band, you’d get roughly half the maximum discount applied to that £5,832, not to the £13,500 RV.
Retail, Hospitality and Leisure (RHL) Relief
Aimed at shops, pubs, restaurants and similar leisure spaces. From the April 2026 revaluation, this relief moved from a percentage discount to permanently lower RHL-specific multipliers — 5p below the general rate, working out at 38.2p (RV under £51,000) and 43.0p (RV £51,000–£499,999) rather than the usual 43.2p/48p. It applies automatically to qualifying premises rather than being claimed separately, and there’s no cap or upper threshold like the old 40%-relief-capped-at-£110,000 scheme. Doesn’t apply to a plain office or storage unit, but it’s relevant if your workshop has a retail element — think a bakery workshop with a shop counter out front.
Transitional relief
After the April 2026 revaluation, some businesses saw sharp jumps in RV. Transitional relief caps how fast your bill can rise year-on-year, so a big increase gets phased in rather than landing all at once. Worth checking if your local valuation jumped — you may not be paying the full new amount straight away.
Multiple properties
Renting more than one premises — say, an office plus a separate storage unit — can affect relief on your main property. In England, a second property with an RV above £2,899, or a combined RV across all your properties above £20,000 (£28,000 in Greater London), can reduce or kill your SBRR on the main site. Worth doing the maths before signing for that extra storage space, not after.
Offices, workshops and storage: does the type of premises matter?
Not for the calculation itself — office, workshop, storage unit, all assessed the same way on RV and multiplier. Where it does matter is valuation and relief eligibility:
- Offices are usually valued per square metre and rarely qualify for RHL relief, so SBRR and the small business multiplier are your main levers.
- Workshops can swing more in valuation depending on fittings, machinery, or trade-specific alterations. Worth double-checking the VOA’s assessment reflects your actual space rather than a generic unit — this is a common source of overvaluation.
- Storage units are often small and low-value enough to sit comfortably under the £12,000 SBRR threshold on their own. But if it’s a second property alongside somewhere else you rent, check the multiple-property rules above before assuming it’s rate-free — a lot of businesses get caught out here.
If your rateable value looks wrong
You can challenge it with the VOA through the Check, Challenge, Appeal (CCA) process — particularly worth doing if the April 2026 revaluation pushed you just over the SBRR threshold. Get it back under £12,000 or £15,000 and your relief comes back with it.
Example: a workshop revalued at £15,500 in April 2026 (just over the £15,000 SBRR cut-off) successfully challenges its valuation down to £14,200. That’s back within the taper, so instead of paying full rates, the business gets partial relief — worth the hassle of the challenge.
Who’s actually liable to pay
For both sole traders and limited companies, the council bills whoever’s named on the lease as occupier. For a limited company, that’s the company — the liability sits with the business, not you personally as director. For a sole trader, there’s no legal split between you and the business, so it’s effectively your bill either way. This is one spot where trading structure genuinely matters, even though it doesn’t change how big the bill is.
The takeaway
Business rates aren’t optional, but they’re not set in stone either. The multiplier and thresholds are national, but relief is where all the variation happens — and it rarely gets applied without you asking for it. Before signing a lease on any premises, find out the current rateable value, work out roughly what you’d owe before relief, then check what you can actually claim back.
Rates, thresholds and reliefs above reflect the 2026/27 tax year in England. Scotland and Wales run separate schemes with their own figures — always confirm current rates with your local council or gov.uk before budgeting.