The National Non-Domestic Rate, or Business Rate as it is commonly called, is a national tax on businesses to help finance the cost of local services. It was introduced in April 1990 as a replacement for locally set general rates, and the money collected from businesses is paid into a central pool maintained by the Government. This money is then redistributed through Government grants to bodies like the fire and police authorities and to local councils in proportion to their adult population. This method ensures that areas with relatively few businesses or where property values are generally low are not disadvantaged.

 

The business rate bill is based on the rateable value of each property, which has a multiplier applied to it. The rateable value is decided by the Valuation Office Agency (which is part of the Inland Revenue), and the Government fixes the multiplier each year. By law, this multiplier cannot rise by more than the amount of the increase in the Retail Price Index. From 2005/06 there are two multipliers; the standard one is 42.2 pence in the pound, and a small business multiplier that is 41.5 pence in the pound.