How your property is valued for business rates
How the Valuation Office Agency calculates your rateable value for business rates.
Applies to England, Northern Ireland and Wales
Overview
The Valuation Office Agency’s (VOA) calculates a rateable value for each business property in England and Wales.
A rateable value is an estimate of what it would cost to rent a property for a year, on a set valuation date. The property is assumed to be:
- vacant
- in reasonable repair
- available to let on the open market
It is also assumed that the tenant pays for the business rates, repairs and insurance.
The valuation date is set by law and helps make valuations consistent.
Rateable value is not what you pay in rent or business rates. Your local council uses the rateable value to work out your business rates bill.
Ways of working out rateable value
There are 3 main ways of working out rateable value. The method the VOA uses depends on the type of property and the information available about the property.
Rental method
The rental method is used to value properties like shops, factories and offices. It’s used where there’s a lot of information available about lease terms and rents paid.
Profits method
The profits method is used to value properties like hotels, leisure centres and theme parks. It’s used when there is not much information about rents paid. The rateable value is based on the rent a tenant would be willing to pay to achieve a certain amount of trade.
Contractor’s basis
The contractor’s basis is used to value properties like schools, airports and chemical plants. It’s used for properties that are never rented out so there is no information about rents paid. The rateable value is based on the cost of constructing a like for like building.
Find and compare your rateable value
View your property’s rateable value and how it has been calculated with the find a business rates valuation service. You can also see the rateable values and calculations of comparable properties.
Shops and high street businesses
The VOA uses a ‘rental’ method to value businesses on the high street like shops, hairdressers and banks.
The VOA gathers information about rents paid for shops and high street businesses. It analyses the information and works out a price per square metre for the property. It also considers local conditions and property characteristics like:
- an unusual shop shape
- additional window display frontages
- split levels
- sales areas hidden by pillars
Zoning
Zoning is used to apply the price per square metre to the property and get the rateable value. The front of a shop including any window display area is considered the most valuable space.
Each zone covers the width of the shop and has a depth of 6.1 metres. Zone A starts at the shop window. As you move further into the shop, each zone is half the value of the one before it. Spaces like store rooms or upstairs offices are valued as a percentage of the zone A rate.
VOA: how we use retail zoning for business rates
Plant and machinery
Plant and machinery may be shown separately in the rateable value calculation and can include:
- heating
- sprinklers
- air conditioning
- cold stores
Valuation scheme
Shops and high street properties that are like each other will be part of a valuation scheme. This helps make rateable values fair and consistent.
Measurement method
Shops are measured using the net internal area (NIA) method.
Factories, workshops and warehouses
The VOA uses the ‘rental’ method to value industrial properties like factories, warehouses and workshops.
The VOA gathers information about rents paid for industrial properties. It analyses the information and works out an average price per square metre.
To get the price per square metre of an individual property, the VOA considers things like:
- size
- property age
- location
- features, such as eaves height and heating
The price per square metre is multiplied by the property floor area to get the rateable value.
Plant and machinery
Plant and machinery, car parking and land may be shown separately in the rateable value calculation. Plant and machinery can include:
- sprinklers
- air conditioning
- CCTV
- heating
Valuation scheme
Properties that are like each other and valued using the same method are grouped into a valuation scheme. This helps make rateable values fair and consistent.
Measurement method
Industrial properties are measured using the gross internal area (GIA) method.
Offices
The VOA uses the ‘rental’ method to value offices.
The VOA gathers information about rents paid for offices. It analyses the information and works out a price per square metre for each floor area. It also considers things like:
- rent-free periods
- improvements made by the tenant
- unusual lease terms
A price per square metre is multiplied by the property floor area to get the rateable value.
Car parking may be shown separately in the valuation or reflected in the overall price per square metre.
Plant and machinery
Plant and machinery may be shown separately in the rateable value calculation and can include:
- air conditioning
- heating
- CCTV
- sprinklers
Valuation scheme
Properties that are like each other and valued using the same method are grouped into a valuation scheme. This helps make rateable values fair and consistent.
Measurement method
Offices are measured using the net internal area (NIA) method.
Pubs
The VOA uses ‘fair maintainable turnover’ (a type of profits method) to value public houses.
This is the annual income a reasonably efficient landlord could expect to achieve on a certain date.
A rental percentage is applied to the turnover estimate to get the rateable value. The percentage takes into account things like the type of pub, its location and if it sells food.
The percentages are agreed with the industry groups and they’re in the valuation of public houses approved guide.
VOA: how we assess pubs for business rates
Hotels
The VOA uses ‘fair maintainable trade’ (a type of profits method) to value hotels.
This is the annual trade a reasonably efficient operator could expect to achieve on a certain date . The VOA analyses trade from previous years and considers the trade of comparable properties.
The VOA applies a percentage to the fair maintainable trade to get the rateable value.
The percentage applied depends on:
- the type of hotel
- expected profit
- expected trading performance
Restaurants
The VOA uses the ‘rental’ method to value restaurants.
The VOA gathers information about rents paid for shops and restaurants. It analyses the information and works out a price per square metre. It also considers local conditions and property characteristics such as:
- outside seating
- unusual layouts
- air conditioning
Zoning or an ‘overall’ method is used to apply the price per square metre to the property and get the rateable value.
Overall method
The price per square metre is applied to the floor area of each part of the building. The most important space, such as the main dining area on the ground floor, is valued at 100% price per square metre.
Kitchens, stores and customer toilets are valued at a lower percentage of the price per square metre.
Kitchens that customers can see and are part of the dining experience are valued at 100% price per square metre.
Zoning
The restaurant is divided into zones. Each zone covers the width of the restaurant and has a depth of 6.1 metres.
Zone A starts at the window and is valued at 100% price per square metre. As you move deeper into the restaurant, each zone is half the value of the one before it.
Spaces like store rooms or upstairs offices are valued at a price per square metre.
Plant and machinery
Plant and machinery may be shown separately in the valuation and can include air conditioning and lifts.
Valuation scheme
Properties that are like each other and valued using the same method are grouped into a valuation scheme. This helps make rateable values fair and consistent.
Measurement method
Restaurants are measured using the net internal area (NIA) method.
Valuation schemes
The VOA groups comparable properties into a valuation scheme. This helps them value properties fairly and consistently.
Local valuation schemes
Local valuation schemes are used for properties valued using the rental method, such as shops, offices and industrial properties.
Each scheme has a range of prices for floor areas (such as an area of a shop) and additional items (such as parking spaces). Properties in the scheme are given a price from within that range. This is the property’s ‘base rate’. To set the base rate, the VOA looks at the individual characteristics of a property.
For example, the VOA may assume none of the properties in a valuation scheme have fire protection. If one of the properties in the scheme does have fire protection, the VOA may give the property a higher base rate or make an adjustment to reflect its value.
National valuation schemes
Properties in national valuation schemes are usually valued using the profits method or contractor’s basis.
The VOA discusses some national valuation schemes centrally. Where possible, they’re also agreed with industry bodies or their representatives.
Measuring the property
The two methods the VOA uses most often to find out the area of a building are net internal area (NIA and gross internal area (GIA).
They’re based on the Royal Institution of Chartered Surveyors (RICS) code of measuring practices.
VOA: how we measure properties for business rates
NIA
NIA is the usable area within a building measured to the inside face of perimeter walls at each floor level. It’s used for properties like shops, offices and restaurants.
Things that contribute to the usable area include:
- entrance halls
- kitchens
- built-in cupboards in occupy usable areas
- ramps, sloping areas and steps in usable areas
- areas occupied by ventilation and heating grilles
Things that do not contribute to the usable area include:
- shared entrance halls, landings and balconies
- internal structural walls
- toilets and cleaner’s rooms
- columns and chimney breasts
- stairwells and lift shafts
Example
An office is 10m long by 12m wide. A cleaner’s cupboard in a corner of the office measures 2m by 1m. The usable area is 118 square metres (120 square metres minus 2 square metres).
GIA
GIA is the area of a building measured to the internal face of the perimeter walls at each floor level. It’s used for properties like factories, workshops and warehouses.
Things that contribute to the area of a building include:
- entrance halls
- internal walls and partitions
- internal balconies and walkways that are open-sided
- columns and chimney breasts
- stairwells and lift shafts
Things that do not contribute to the area of a building include:
- the thickness of the perimeter wall
- external projections
- external balconies and walkways that are open-sided
- canopies
See the latest RICS Code of measuring practice on the RICS website.
Shared property and occupying more than one property
Properties in England
If you occupy more than one part of a property, the number of valuations you get depends on whether:
- the parts you occupy touch each other or not
- you use the parts for the same purpose
The parts or floors you occupy touch when (either of these apply):
- one part shares all or some of a wall (or type of enclosure) with the other part
- all or some of one floor is directly over the ceiling of the other floor
The VOA will give one valuation for all the parts that touch and are used for similar purposes. You will get one business rates bill for these parts.
The parts or floors you occupy do not touch when they are separated by (either of these):
- another occupier
- areas shared with other occupiers such as lifts, stairwells or hallways
The VOA will give a valuation for each part that does not touch. You will get more than one business rates bill.
If you have parking separated from the building by a shared area, the VOA will give separate valuations for the building and the parking.
Example 1
Assim’s business occupies the ground floor to the third floor of an 8 storey office building. Another company occupies the fourth to the seventh floors. Access to all floors is by communal lifts and stairs. Assim’s business will receive one valuation for all the floors it occupies. The other company will receive one valuation for all the floors they occupy.
Example 2
Jessica’s business occupies the ground floor and second floor of a 4 storey office building. Another company occupies the first and third floors. Access to all floors is by communal lifts and stairs. Jessica’s business will receive a valuation for each floor it occupies. The other company will receive a valuation for each floor they occupy.
Properties in Wales
Before 1 April 2023 if you occupy buildings that are side by side or one floor above another in a building, you will receive a valuation for each building or floor.
If there is a connection between the buildings or floors that you do not share with anyone else, you will receive one valuation for the parts that are connected.
Example 1
Cynthia has 2 shops side by side with a doorway connecting them. Both shops will be given in one valuation.
Example 2
Owen has two shops side by side and the only way to move between them is to use the street. Each shop will get a separate valuation.
From 1 April 2023 Wales will adopt the same rules as England.
Repair and refurbishment
Repair
The Valuation Office Agency values properties assuming that they’re in reasonable repair.
If your property is beyond economic repair the rateable value may be affected. Beyond economic repair is when a reasonable landlord thinks the cost of repairing the property is not financially worthwhile.
More about repair and rateable value.
Refurbishment
Refurbishment may include improvements, extensions and changing a property’s use.
If you’re refurbishing your property, the VOA may change the rateable value when:
- the works are much more than repairs
- the works will change the property significantly
- the property cannot be usefully used during the works
The rateable value may go up to reflect the higher quality of a refurbished property.
Updates to this page
Last updated 10 February 2023 + show all updates
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Added more information about different types of properties and how they are valued
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Updated some broken links to the rating manual and included information about the 2023 rating list.
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Information has been added on: zoning, single and multiple hereditaments, repairs and refurbishment, and adjustments. More information has also been included for plant and machinery, NIA and GIA.
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Content reviewed and updated appropriately.
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Changed title "The Non-domestic Rating List" to "Check your rateable value".
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First published.