Transitional Relief

Commercial premises were revalued from 1 April 2023. Following the revaluation, transitional relief was automatically be given to eligible business ratepayers that experienced an increase in their business rates bill.

The scheme operates for three years, although entitlement may cease earlier if the conditions for receiving it are no longer met.

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 based upon a formula that 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.

The calculation can, in certain instances, become more complex, such as where small business rate relief is also awarded in the case of splits and mergers of properties.

If such circumstances apply to you and you want details of the calculation applied, you can request an explanation via 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 “threshold” set by the government to be applied, depends upon the rateable value of the for the property concerned, as 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.

Table 1 - Business Rates Increase Limits effective 1st April 2023

Examples

The following examples are intended to demonstrate how transitional relief is calculated in general terms for an increase in Business Rates payable for 2023/24 and 2024/25.

Example 1 – A small property with a rateable value increase from the revaluation for 2023/24

• Rateable value as at 31 March 2023 = £11,300
• Rateable value as at 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 as at 31 March 2023 = £11,300
• Rateable value as at 1 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 2 - A large property with a rateable value increase from the revaluation for 2023/24

• Rateable value as at 31 March 2023 = £100,000
• Rateable value as at 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.  
• 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 as at 31 March 2023 = £28,500
• Rateable value as at 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 as at 31 March 2023 = £28,500
• Rateable value as at 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.  
• The actual amount payable by the Business Ratepayer will therefore be as follows:
• £35,000 x 0.499 = £17,465.00