Can I Claim Business Rates as a Business Expense?
Yes - business rates on commercial premises are fully deductible.
What HMRC Says
Business rates paid on commercial premises are allowable expenses.
When You Can Claim
- Business rates on office/shop
- Rates on storage premises
- Rates on any business property
When You Cannot Claim
- Council tax on residential property (unless home office proportion)
Understanding Business Rates Expenses
Business rates are a tax on non-domestic properties, calculated based on the rateable value of your premises as assessed by the Valuation Office Agency. For limited companies occupying commercial premises, business rates are a fully deductible operating expense. They reduce your taxable profits pound for pound, just like rent or utility bills.
The amount you pay depends on your property's rateable value multiplied by the rates multiplier set annually by the government. For 2025/26, the standard multiplier is approximately 55p in the pound, and the small business multiplier is approximately 50p. So a property with a rateable value of £15,000 would face a bill of around £7,500 before any reliefs are applied. The actual bill can vary significantly depending on location and the reliefs available.
Small Business Rate Relief (SBRR) is critical for micro-businesses. If your property has a rateable value below £12,000, you receive 100% relief — meaning you pay zero business rates. Between £12,001 and £15,000, there is tapered relief that gradually reduces. This relief applies automatically if you occupy only one business property, but you may need to apply to your local council to receive it. Even if you qualify for full relief and pay nothing, the notional cost would still be shown in your accounts.
For companies working from home rather than commercial premises, business rates do not apply to residential properties. You pay council tax instead, and only a proportion of that council tax is claimable through the company if you use part of your home for business. Be cautious about using a home office so extensively that your local council reclassifies part of the property as non-domestic — this is rare but can happen if you have a clearly separate business unit.
Other reliefs worth knowing about include retail, hospitality, and leisure relief (which has been extended in various forms since 2020), charitable rate relief for registered charities, and empty property relief for the first three months a property is vacant. Your local council can advise on which reliefs apply to your situation.
Real-World Examples
Small office qualifying for full rate relief
A consultancy rents an office with a rateable value of £9,500. Because this is below the £12,000 threshold, the company qualifies for 100% Small Business Rate Relief and pays zero business rates. The director applies to the local council and the relief is applied automatically going forward.
Retail premises with partial relief
A coffee shop has a rateable value of £22,000. The annual rates bill is approximately £11,000. The shop may qualify for retail rate relief if the government scheme is still active, reducing the bill significantly. The full amount paid (after any relief) is deductible.
Warehouse and office with separate assessments
A distribution company occupies an office (rateable value £8,000) and a warehouse (rateable value £18,000). The office qualifies for Small Business Rate Relief only if the company does not occupy the warehouse — the relief requires that you occupy only one property. With two properties, the full rates on both are payable but deductible.
Empty property rates
A company vacates its office mid-lease and the property stands empty for six months. No business rates are payable for the first three months. After that, empty property rates apply at the full multiplier. Both the occupied and empty property rates are deductible business expenses.
Common Mistakes to Avoid
- Not applying for Small Business Rate Relief when eligible — the relief is not always applied automatically and many small businesses miss out on 100% relief simply because they did not apply
- Assuming you cannot claim business rates because you also qualify for a relief — even with partial relief, the amount you do pay is fully deductible, and you should still record the full liability and relief in your accounts
- Occupying two or more properties and assuming Small Business Rate Relief still applies — SBRR is only available if you use one property, so taking on a second unit means you lose the relief on the first
- Confusing business rates with council tax — if you work from home, you pay council tax (not business rates) unless part of your home has been reclassified as non-domestic
Frequently Asked Questions
Are business rates tax deductible?
Yes, business rates on commercial premises are fully deductible against your company's Corporation Tax. The rates are an operating expense that reduces your taxable profits. Keep your rates bill as evidence.
What is Small Business Rate Relief and do I qualify?
Small Business Rate Relief gives up to 100% rates relief for properties with a rateable value under £12,000, with tapered relief up to £15,000. You must occupy only one business property to qualify. Apply through your local council — it is not always automatic.
Do I pay business rates if I work from home?
No. Residential properties pay council tax, not business rates. You can claim a proportion of your council tax through the company as a home office expense. Business rates only apply to non-domestic properties like offices, shops, and warehouses.
How are business rates calculated?
Business rates are calculated by multiplying your property's rateable value (set by the Valuation Office Agency) by the rates multiplier (set annually by the government, approximately 50-55p in the pound). Reliefs are then applied. You can check your property's rateable value on the VOA website.
Can I appeal my business rates valuation?
Yes, you can challenge your rateable value through the Check, Challenge, Appeal process via the Valuation Office Agency. If you believe the rateable value is too high compared to similar properties, it is worth investigating. A successful appeal can reduce your rates bill significantly.
Source: HMRC Business Income Manual BIM46400 (Rates and property taxes) and GOV.UK guidance on business rates and Small Business Rate Relief
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