Local government finance circular 7/2026: non-domestic rates relief guidance

Annex D: Small business transitional relief worked examples

Example 1

Ratepayer is liable for rates on one property only.

Rateable value (RV) from 2022-23 to 2025-26 was £11,900 (no change at the 2023 revaluation).

Annual gross liability in 2022-23 to 2025-26 is £11,900 x 0.498p = £5,926.20.

The rateable value is less than £12,001 and there is only one property so 100% SBBS relief is awarded.

Annual Bill in 2022-23 to 2025-26 is £0.

RV in 2026-27 is £14,000. Gross liability in 2026-27 = £14,000 x 0.481 = £6,734.00. This is 13.63% higher than the gross liability in 2025-26 so the 2026 Revaluation Transitional Relief Cap does not apply (as the cumulative cap for small properties with a rateable value under £20,000 in 2026-27 relative to the gross bill in 2025-26 is 15%).

As there is only one property and the RV in 2026-27 is between £12,001 and £15,000, the SBBS relief percentage is calculated according to the following formula: 100 – (75 x (1 - (15000 - RV)3000 ))

SBBS Relief percentage = 100 – (75 x (1 - (15000 - 14000)3000 )) = 100 – (75 x (1 – 0.33333…))

= 100 – 50 = 50.

Pre- Small Business Transitional Relief (SBTR) bill in 2026-27: £6,734 (1 - 0.5)  = £3,367.

As this ratepayer was in receipt of SBBS relief on this property on 31 March 2026 and their pre-SBTR bill will rise, they are entitled to SBTR in 2026-27.

The increase in bill between 2025-26 and 2026-27 is capped at 25% of what it otherwise would have been. Therefore, the bill in 2026-27 is £0 + (£3,367 x 0.25) = £841.75.

Example 2

RV in 2025-26 was £12,000.

Annual gross liability in 2025-26: £12,000 x 0.498 = £5,976.00.

The rateable value is less than £12,001, and there is only one property, so 100% SBBS relief is awarded.

Net bill in 2025-26 is £0.

RV in 2026-27 is £13,000. The gross liability in 2026-27 is £13,000 x 0.481 = £6,253.00.

This is 4.64% higher than the gross liability in 2025-26 so the 2026 Revaluation Transitional Relief Cap does not apply (as the cumulative cap for small properties with a rateable value under £20,000 in 2026-27 relative to the gross bill in 2025-26 is 15%).

As there is only one property and the RV in 2026-2027 is between £12,001 and £15,000, the SBBS relief percentage is calculated according to the following formula:

100 – 75 x (1 - 15000 - RV3000 )

SBBS Relief percentage = 100-75*1-15000-130003000=100-75*1-20003000=100-75*1-0.666…=100-75*0.333…=100-25=75 %

The net bill before Small Business Transitional Relief is £6,253 x (1 – 0.75) = £1,563.25.

 

As this ratepayer was in receipt of SBBS relief on this property on 31 March 2026 and their pre-Small Business Transitional Relief bill will rise, they are entitled to Small Business Transitional Relief in 2026-27. The increase in bill between 2025-26 and 2026-27 is capped at 25% of what it otherwise would have been.

The increase in the net bill is £1,563.25 – 0 = £1,563.25.

The Small Business Transitional Relief transitional limit is 0 + (1,563.25 x 0.25) = £390.81. The final net bill for 2026-27 is £390.81.

Example 3

Ratepayer is liable for rates on one property only.

In 2022-23 the property had an RV of £11,000 and as it was no more than £12,000, was in receipt of 100% Small Business Bonus Scheme with a net bill of £0.

On 1 April 2023 the RV rose to £20,000 and did not change until 1 April 2026 so the property lost all entitlement to SBBS relief and had a gross bill in 2025-26 of £9,960.

The Bill in 2025-26 was however capped by 2023 Small Business Transitional Relief and the net bill was therefore £1,800.

Note the liability in 2025-26 was not capped by 2023 Revaluation Transitional Relief as the cap under that in 2025-26, for properties with a rateable value up to and including £20,000, was 93.3%; and the gross bill increase from 2022-23 to 2025-26 was (20,000 x 0.498)/(11,000 x 49.8) - 1 = 81.8%.

RV in 2026-27 is £21,000.

Gross liability in 2026-27: £21,000 x 0.481 = £10,101. As the rateable value is greater than £20,000, there is no SBBS relief entitlement. This is a £8,301 increase on the 2025-26 net bill of £1,800.

There is no 2026 Revaluation Transitional Relief entitlement either as the gross bill between 31 March 2026 and 1 April 2026 rose by (21,000 x 0.481)/(20,000 x 0.498) - 1 = 1.4%. This is less than the cap for medium properties with an RV on 1 April 2026 betwseen £20,001 and £100,000 which is 30%.

However, as the ratepayer was in receipt of 2023 Small Business Transitional Relief on 31 March 2026, they are entitled to 2026 Small Business Transitional Relief capping increases in net bills at 25% in 2026-27, so the final bill for 2026-27 is: £1,800 + (£8,301 x 0.25) = £3,875.25.

Example 4

The property is a licenced self-catering property and the ratepayer is liable for rates on one property only.

The RV in 2025-26 is £11,000; the property is in receipt of 100% relief through the Small Business Bonus Scheme (SBBS).

The gross bill in 2025-26 is £11,000 x 0.498 = £5,478

The net bill in 2025-26 receives 100% relief and is therefore £0.

RV in 2026-27 of £15,000.

Gross bill for 2026-27: £15,000 x 0.481 = £7,215.

The cumulative Revaluation Transitional relief cap for a self catering property is 15%, which is lower than the 31.7% increase in gross bill (£7,215 / £5,478 -1 = 31.7%), and therefore applies in this case.

Revaluation Transitional relief reduces the gross bill by £915.30 from £7,215 to £6,299.70 (£5,478 x 1.15 = £6,299.70).

As the 2026-27 RV is £15,000, the property qualifies for 25% relief through SBBS, and also qualifies for 15% Retail, Hospitality and Leisure relief. Combined, these reduce the bill by 40% to (1-0.25-0.15) x £6,299.70= £3,779.82.

As the ratepayer saw a reduction in SBBS relief between 2025-26 and 2026-27, they are eligible for SBTR. This reduces the increase in the net bill (from zero to £3,779.82) to 25% of what it would have been, leading to a final bill for 2026-27 of 0.25 x £3,779.82 = £944.96.

Example 5

The property is a pub with RV that increased from £17,500 to £37,500 at the 2023 revaluation.

The gross bill in 2025-26 was £16,854.81, as it was capped at a maximum increase of 193.4% compared to its 2022/23 gross bill of £8,715. This cap takes effect because it is lower than what the gross bill in 2025/26 would otherwise have been (£18,675 = £37,500 x 0.498).

As the property had an RV of £51,000 or less and was not located on an island or in a specified remote area, it was eligible for 40% Hospitality Relief reducing the bill in 2025-26 to £10,112.89.

As the increase in RV at the 2023 Revaluation took the property over the Small Business Bonus Scheme threshold, it also benefitted from Small Business Transitional Relief (SBTR), limiting the increase in its net bill relative to 2022/23 to £1,800.

As the property RV prior to the 2023 revaluation was more than £15,000 but no more than £18,000, it benefitted from 25% Small Business Bonus Scheme Relief in 2022-23. The property’s net bill prior to the 2023 revaluation was £6,536.35 (£17,500 * 0.498)*(1-0.25).

In 2025-26, therefore, the net bill of the property was capped at £8,336.25 (£6,536.25 + £1,800) in 2025-26.

At the 2026-27 revaluation, the property’s RV increases to £41,000.

The gross bill in 2026-27 is £19,721.00 (£41,000 * 0.481). As the increase in gross bill is less than the 1.3 Revaluation Transitional Relief (RTR) limit for properties with RV over £20,000 and up to £100,000, it does not benefit from RTR.

The property benefits from Retail Hospitality and Leisure (RHL) relief of 15% as well as an additional 25% as it is a licensed hospitality property, reducing the bill by 40%, to £11,832.60.

As the 2025-26 bill was capped by SBTR, the property is eligible for SBTR in 2026-27, reducing the increase in the net bill to a maximum of 25% of what it would have been in 2026-27 without SBTR ((£11,832.60 - £8,336.25) = £3,496.35 * 0.25 = £874.09).

The net bill in 2026-27 is therefore £9,210.34 (£874.09 + £8,336.25).

Example 6

A pub on the mainland with RV in 2025-26 of £42,000. The gross bill in 2025-26 was £20,916.00 (£42,000*0.498). As the property’s RV was no more than £51,000 it was eligible for 40% Hospitality Relief.

The net bill in 2025-26 was therefore £12,549.60

RV increases to £50,000 at the 2026 Revaluation and the gross bill in 2026-27 is £24,050.00 (£50,000*0.481).

The gross bill has increased by 15%. As this is less than the 30% Revaluation Transitional Relief cap for properties with RV over £20,000 and no more than £100,000, it is not eligible for Revaluation Transitional Relief.

As the property’s RV is no more than £100,000, it is eligible for 15% Retail, Hospitality and Leisure (RHL) relief and a further 25% relief due to it being a licensed hospitality property.

RHL relief therefore reduces the bill in 2026-27 to £14,430.00 (£24,050.00*(1-0.4)).

As the property benefitted from Hospitality relief in 2025-26, and its pre-Small Business Transitional Relief (SBTR) bill in 2026-27 is more than its 2025-26 net bill, it is also eligible for SBTR. This reduces the increase in the net bill relative to 2025-26 to 25% of what it would have been without SBTR (0.25*(£14,430.00 - £12,549.60) = £470.10.

The net bill in 2026-27 after SBTR is therefore (£470.10 + £12,549.60) = £13,019.70.

Example 7

A pub on the mainland with RV of £49,000 in 2025-26. The gross bill in 2025-26 was £24,402.00 (£49,000.00 * 0.498). As the property’s RV was no more than £51,000 it benefitted from 40% Hospitality relief.

The net bill in 2025-26 was therefore £14,641.20 (£24,402.00 * (1-0.4)).

The property’s RV increases to £56,500 at the 2026 revaluation and the gross bill in 2026-27 is £30,227.50 (£56,500 * 0.535).

As the gross bill increase of 24% is less than the 30% Revaluation Transitional Relief cap for properties with RV over £20,000 and no more than £100,000 it is not eligible for Revaluation Transitional Relief.

As the property’s RV is no more than £100,000, it is eligible for 15% Retail, Hospitality and Leisure (RHL) relief and a further 25% relief due to it being a licensed hospitality property.

The business which operates the pub, however, has reached its £110,000 business level cap through RHL relief awarded to other properties. Therefore, in this instance, the property does not benefit from RHL relief.

As the property benefitted from Hospitality relief in 2025-26, and its pre-Small Business Transitional Relief (SBTR) bill in 2026-27 is more than its 2025-26 net bill, it is also eligible for SBTR. This reduces the increase in the net bill in 2026-27 to 25% of what it otherwise would have been ((£30,227.50 - £14,641.20) = £15,586.30* 25% = £3,896.58).

The net bill in 2026-27 is therefore £18,537.78 (£3,896.58 + £14,641.20).