Business rates in England

Taxation in the United Kingdom
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UK Government
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Scottish Government
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Welsh Government
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Local Government
Council Tax Domestic rates in Northern Ireland Business rates in England Business rates in Wales Business rates in Scotland Business rates in Northern Ireland
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Business rates in England, or non-domestic rates, are a tax on the occupation of non-domestic property (National Non-Domestic Rates; NNDR). Rates are a property tax with ancient roots^[1] that was formerly used to fund local services that was formalised with the Vagabonds Act 1572 and superseded by the Poor Relief Act 1601. The Local Government Finance Act 1988 introduced business rates in England and Wales from 1990, repealing its immediate predecessor, the General Rate Act 1967. The act also introduced business rates in Scotland but as an amendment to the existing system, which had evolved separately to that in the rest of Great Britain. Since the establishment in 1997 of a Welsh Assembly able to pass legislation, the English and Welsh systems have been able to diverge. In 2015, business rates for Wales were devolved.^[2]

The Local Government Finance Act 1988, with follow-up legislation, provided a fresh administrative framework for assessing and billing but did not redefine the legal unit of property, the hereditament, that had been developed through rating case law.

Properties are assessed in a rating list with a rateable value, a valuation of their annual rental value on a fixed valuation date using assumptions fixed by statute. Rating lists are created and maintained by the Valuation Office Agency, a UK government executive agency. Rating lists can be altered either to reflect changes in properties, or as valuations are appealed against. New rating lists are normally created every three years. The most recent rating list was published in 2023.^[3]

In financial year 2014–15, authorities collected a total of £22.9 billion in business rates, representing 3.53% of the total UK tax income and achieving an average in-year collection rate of 98.1%.^[4]

On 1 April 2013 a new system of business rates retention began in England. Before April 2013 all business rate income collected by councils formed a single, national pot, which was then distributed by government in the form of formula grant. Through the Local Government Finance Act 2012, and regulations that followed, the government gave local authorities the power to keep up to half of business rate income and transfer half of it centrally, to central government. The central share is then distributed to councils in the form of revenue support grants. The other half kept by local authorities are then subjected to tariff, levy, top-up and safety payments depending on the financial position of the council. According to the government the change gives financial incentives to councils to grow their local economies and increase their income from business rates. At the same time the new scheme has resulted in more risk and uncertainty.^[5]