Commercial premises were revalued from 1 April 2023. Following the revaluation, transitional relief was automatically given to eligible ratepayers whose bills had increased.
The scheme lasts for three years. Entitlement may end earlier if you no longer meet the eligibility criteria.
Changes of circumstance arising after 1 April 2023, do not generally affect entitlement to transitional relief. However, any transitional relief given, only applies to the period of liability for the ratepayer concerned.
Additionally, any increase in the rateable value of a property with an effective date after 1 April 2023, does not attract transitional relief.
Entitlement to transitional relief is set by a formula, The formula compares the amount of business rates payable, initially as at 31 March 2023, (a “base limit”) with the amount payable on 1 April 2023, (i.e. a notional chargeable amount - “NCA”).
If the business rates charge increases by more than a ‘threshold’ set by the government, the amount of the increase is restricted.
Sometimes, the calculation is more complex. An example of this is when small business rate relief is also awarded after properties are split or merged.
If you need help to understand a complex calculation, you can request an explanation on our enquiry form.
Transitional relief does not apply to the Business Rates Supplement levied by the Greater London Authority (GLA) for commercial properties with a rateable value exceeding £75,000.
The government’s “threshold”, depends on the rateable value of the for the property, This is described below and further referenced in Table 1 – Business Rates Increase Limits.
- A small property size is a 2023 rateable value of less than or equal to £28,000 in London.
- A medium property size is a 2023 rateable value of more than £28,000 and less than £100,000 in London.
- A large property size is a 2023 rateable value above £100,000.
Business Rates Increase Limits effective 1st April 2023
- Year 2023 to 2024
- Small property 5%
- Medium property 15%
- Large property 30%
- Year 2024 to 2025
- Small property 10% plus inflation
- Medium property 25% plus inflation
- Large property 40% plus inflation
- Year 2025 to 2026
- Small property 25% plus inflation
- Medium property 40% plus inflation
- Large property 55% plus inflation
Examples
The following examples demonstrate how transitional relief is calculated in general terms for an increase in Business Rates payable for 2023/24, 2024/25 and 2025/26,
Example 1 – A small property with a rateable value increase from the revaluation for 2023/24
- Rateable value on 31 March 2023 = £11,300
- Rateable value on 1 April 2023 = £14,100
- 31 March 2023 Base limit (BL) = £11,300 x small business multiplier for 2022/23 (0.499) = £5,638.70
- 1 April 2023 Notional Chargeable amount (NCA) = £14,100 x small business multiplier for 2023/24 (0.499) = £7,035.90.
- The maximum increase in Business Rates permitted for a small property, as per Table 1 above, is 5%.
- The maximum increase permitted (i.e. the threshold”) is £5,638.70 x 105% = £5,920.64.
- As the NCA equates to £7,035.90, the difference between that amount and the threshold of £5,920.64, equates to the amount of transitional relief, which in this example is £1,115.26.
- The actual amount payable by the Business Ratepayer will therefore be as follows:
- £14,100 x 0.499 = £7,035.90
- Less transitional relief of £1,115.26
- Total amount payable = £5,920.64
Example 1a – A small property with a rateable value increase from the revaluation for 2024/25
- Rateable value on 31 March 2023 = £11,300
- Rateable value on1 April 2023 = £14,100
- 31 March 2024 Base limit (BL) = £5,920.64 (i.e. amount payable for 2023/24)
- 1 April 2024 Notional Chargeable amount (NCA) = £14,100 x small business multiplier for 2024/25 (0.499) = £7,035.90.
- The maximum increase in Business Rates permitted for a small property in 2024/25, as per Table 1 above, is 10% plus inflation, although no inflation amount is applicable for 2024/25.
- The maximum increase permitted (i.e. the threshold”) is £5,920.64 x 110% = £6,512.70.
- As the NCA equates to £7,035.90, the difference between that amount and the threshold of £6,512.70, equates to the amount of transitional relief, which in this example is £523.20.
- The actual amount payable by the Business Ratepayer will therefore be as follows:
- £14,100 x 0.499 = £7,035.90
- Less transitional relief of £523.20
- Total amount payable = £6,512.70
Example 1b – A small property with a rateable value increase from the revaluation for 2025/26
- Rateable value on 31 March 2023 = £11,300
- Rateable value on1 April 2023 = £14,100
- 31 March 2025 Base limit (BL) = £6512.70 (i.e. amount payable for 2024/25)
- 1 April 2025 Notional Chargeable amount (NCA) = £14,100 x small business multiplier for 2025/26 (0.499) = £7,035.90.
- The maximum increase in Business Rates permitted for a small property in 2025/26, as per Table 1 above, is 125% plus inflation, although no inflation amount is applicable for 2025/26.
- The maximum increase permitted (i.e. the threshold”) is £6512.70 x 125% = £8,140.88.
- As the NCA equates to £7,035.90 and is less than the threshold of £8,140.88, there is no transitional relief award for 2025/26.
- The actual amount payable by the Business Ratepayer will therefore be as follows:
- £14,100 x 0.499 = £7,035.90
- Total amount payable = £7,035.90
Example 2 - A large property with a rateable value increase from the revaluation for 2023/24
- Rateable value on 31 March 2023 = £100,000
- Rateable value on 1 April 2023 = £120,000
- 31 March 2024 Base limit (BL) = £100,000 x small business multiplier for 2022/23 (0.499) = £49,900
- 1 April 2023 Notional Chargeable amount (NCA) = £120,000 x small business multiplier for 2023/24 (0.499) = £59,880.
- The maximum increase in Business Rates permitted for a large property as per Table 1 above, is 30%.
- If we apply 30% to the base limit, the maximum increase permitted is £49,900 x 130% = £64,870.00.
- As the NCA is less than the base limit in this example, there is no transitional relief to be awarded and the same will therefore apply also to 2024/25 and 2025/26.
- The actual amount payable by the Business Ratepayer will therefore be as follows:
- £120,000 x 0.512 = £61,440.00
- Plus Business Rates Supplement payable for GLA of £120,000 x 0.02 = £2,400
- Total amount payable = £63,840.
Example 3 - A medium property with a rateable value increase from the revaluation for 2023/24
- Rateable value on31 March 2023 = £28,500
- Rateable value on 1 April 2023 = £35,000
- 31 March 2023 Base limit (BL) = £28,500 x small business multiplier for 2022/23 (0.499) = £14,221.50
- 1 April 2023 Notional Chargeable amount (NCA) = £35,000 x small business multiplier for 2023/24 (0.499) = £17,465.00.
- The maximum increase in Business Rates permitted for a medium property, as per Table 1 above, is 15%.
- The maximum increase permitted (i.e. the threshold”) is £14,221.50 x 115% = £16,354.73.
- As the NCA equates to £17,465.00, the difference between that amount and the threshold of £16,354.73, equates to the amount of transitional relief, which in this example is £1,110.27.
- The actual amount payable by the Business Ratepayer will therefore be as follows:
- £35,000 x 0.499 = £17,465.00
- Less transitional relief of £1,110.27
- Total amount payable = £16,354.73
Example 3a - A medium property with a rateable value increase from the revaluation for 2024/25
- Rateable value on 31 March 2023 = £28,500
- Rateable value on 1 April 2023 = £35,000
- 31 March 2024 Base limit (BL) = £16,354.73
- 1 April 2024 Notional Chargeable amount (NCA) = £35,000 x small business multiplier for 2024/25 (0.499) = £17,465.00.
- The maximum increase in Business Rates permitted for a medium property, as per Table 1 above, is 25%.
- The maximum increase permitted (i.e. the threshold”) is £16,354.73 x 125% = £20,443.41.
- As the NCA is less than the permitted increase in the base limit in this example, there is no transitional relief to be awarded for 2024/25 and the same will therefore also apply to 2025/26.
- The actual amount payable by the Business Ratepayer will therefore be as follows:
- £35,000 x 0.499 = £17,465.00