Business rates for care homes: domestic rooms, floor area and charity relief

Do care homes pay business rates or council tax?

It depends on how each part of the home is used. Rooms used wholly as someone's home are domestic and fall under council tax. Areas used for short stays, treatment or running the business are non-domestic and pay business rates. A home can be all domestic, all business, or a mix of the two (a "composite" property).

For most business properties the question is simply "what is the rateable value?". For a care home, the earlier question is which parts are rateable at all. The law says property is domestic if it is used wholly for the purposes of living accommodation. A resident who has moved in permanently is living there, and the VOA's Rating Manual accepts that "many nursing homes are likely to be wholly or predominantly domestic".

The picture changes when the home is used for shorter stays or for treatment:

In its guidance on healthcare property, the VOA uses 60 days as a fair dividing line for short-stay accommodation, and says that where active "treatment" is given in a room (which it defines widely, including nursing, therapy and rehabilitation), the room is unlikely to be used wholly as living accommodation. That guidance is written about hospital wards, but it shows how the VOA thinks about the line. For a care home, the answer turns on the facts: who stays, for how long, and what happens in the rooms.

How is a care home that is part domestic and part business assessed?

The whole building is surveyed, then only the non-domestic part is given a rateable value; the domestic part goes into council tax. The VOA bases the split on the normal pattern of use in the home at 1 April 2024, ignoring minor ups and downs in occupancy.

The law says the rateable value of a composite property is the amount reasonably attributable to its non-domestic use. In practice the VOA measures the whole building, identifies which areas are used for business purposes, and values those. The rating list entry and the council tax entry are both flagged as composite.

Two points in the VOA's approach are worth knowing:

• It looks at the usual pattern, not a single day. The split should reflect the normal distribution of uses at the valuation date. A week where a few respite beds stood empty, or a temporary rise in short-stay admissions, shouldn't change it.
• It applies to the actual home. Because care homes are not valued in bulk, the VOA says the split is taken from the home itself rather than from an average for other homes.

An illustration with made-up figures: a 3,000 m² home has 2,000 m² of long-stay residents' rooms and day space, 400 m² of short-stay and respite rooms, and 600 m² of offices, treatment rooms, kitchen and laundry. If the VOA treated the respite rooms and service areas as non-domestic, only 1,000 m² would be valued for business rates. If it also treated the long-stay rooms as non-domestic, the rateable area would triple. Getting this split right usually matters more than the price per square metre.

Shared areas such as a kitchen or laundry that serve both long-stay and short-stay residents need care: whether they count as domestic or business depends on the facts, and the VOA's guidance allows truly minor non-domestic use to be disregarded.

How does the VOA value the business part of a care home?

On rents where there is enough rental evidence, or on the contractor's basis (what it would cost to build, adjusted for age and condition, turned into an annual figure) where there isn't. The VOA's manual says a profits basis is not used for care homes, so your fee levels and occupancy aren't fed in directly.

The rateable value is meant to be the yearly rent the property could let for on 1 April 2024. For care homes the VOA's manual allows two routes:

1. Rental method: used wherever there is enough evidence from rents of the home itself or comparable homes. Converted houses and smaller homes are more likely to fit here.
2. Contractor's basis: used where rents are scarce, which is more common for large purpose-built homes. The VOA works out the cost of building a modern equivalent, adjusts it for age and obsolescence, adds land, and applies a decapitalisation rate set in regulations. A lower rate applies to "healthcare" properties built or adapted wholly or mainly for people with an illness, injury or infirmity and used that way.

The manual tells valuers to cross-check: a value from rents shouldn't be out of line with what the cost approach would give, and vice versa.

Why it isn't based on fees

Unlike hotels and pubs, which are valued on trade (see our hotels guide for how that works), care homes are not valued as a percentage of income. So a fall in occupancy or local authority fee rates doesn't by itself reduce the rateable value, and higher fees don't increase it. What does count is the building: its size, layout, age, quality and location, and how much of it is non-domestic.

Plant and services

Care homes often have lifts, nurse-call and fire systems, standby generators and heating for long hours. In cost-based valuations the VOA reflects these within the building cost rather than valuing them separately, so it is worth checking the specification it has recorded matches the home.

Do room sizes, en-suites and registered places affect a care home's rates?

Room sizes and en-suites affect the floor area and the quality of the building, which feed into a rental or cost-based value. Your registered places and the type of care you're registered for don't set the rateable value, but they are useful evidence of how the home is really used.

Because care homes are measured on gross internal area, every corridor, stairwell and internal wall counts towards the size. A converted Victorian house with long corridors and small rooms can have a large GIA for the number of residents it can take. On the rental method that may justify a lower rate per square metre; on the cost basis it may be reflected as age and functional obsolescence. Check that the VOA has captured the building as it is, not as a modern purpose-built home of the same size.

• En-suites: a home where every room has its own wet room is a different product from one with shared bathrooms. Make sure the record is right either way.
• Room sizes: rooms below what operators now expect, or that can't be used for their original number of residents, are worth explaining with plans and photos.
• Lifts and access: upper floors without a suitable lift are harder to use for residents with limited mobility.
• Registration: care homes in England are regulated by the Care Quality Commission (CQC) and in Wales by Care Inspectorate Wales (CIW). Your registration, the mix of nursing, residential, respite and dementia places, and your admissions records can help show which rooms are long-stay homes and which are short-stay or treatment space.

What should a care home check in its valuation?

Check that the domestic and non-domestic split matches how the home is used, that the floor area and layout are right, that staff flats are left out, that the method suits the building, and that any exemption or charity relief has been applied.

Add the home to your business rates valuation account (or find it in council tax records if there is no business rates entry) and work through these:

1. Is there an entry at all, and is it composite? A wholly non-domestic entry for a home that is mainly long-stay residents may be worth questioning. Equally, if you take mostly short-stay residents, a council tax-only entry may not last.
2. The split: which rooms have been treated as business space? Respite and short-stay rooms, treatment rooms, offices, kitchens and laundries are the usual ones.
3. Staff accommodation: a manager's or owner's flat used as a permanent home should be domestic.
4. Floor area: measured on GIA. Check extensions, demolished or closed wings and areas no longer in use.
5. Specification: lifts, heating, fire protection, generators, en-suites. Over-recording adds value.
6. Method: a converted house valued on modern build costs, or a purpose-built home compared with small conversions, may not reflect its real rental value.
7. Changes since 1 April 2024: new or closed wings, a switch from long-stay to short-stay care (or the other way), or a change of registration should be reported, as they may change both the split and the value.

Can a care home be exempt from business rates?

Part or all of it can be, if it is used wholly for the welfare of disabled people, or for training them or keeping them suitably occupied. The exemption is in the Local Government Finance Act 1988, it applies in England and Wales, and the VOA decides whether it applies.

Schedule 5 of the Local Government Finance Act 1988 exempts property used wholly for certain purposes, including:

• providing facilities for training, or keeping suitably occupied, people who are disabled or who are or have been ill; and
• providing welfare services for disabled people.

"Disabled" follows the Equality Act 2010 in England and the Social Services and Well-being (Wales) Act 2014 in Wales. The exemption can cover the whole property or just the parts used wholly for those purposes. Homes for adults with learning disabilities, day-activity rooms and similar spaces are the sort of areas where it may be relevant.

The tests are strict. In its healthcare guidance the VOA notes that where "treatment" is being provided, the exemption usually won't apply, so a nursing home is less likely to qualify than a home focused on support and day-to-day living. If you think part of your home should be exempt, GOV.UK says to tell the Valuation Office through your valuation account. If it agrees, you won't pay on that part unless the use or premises change.

What reliefs can care homes get, and what does a bill look like?

The main one is charitable rate relief, worth 80% for homes run by a registered charity and used for charitable purposes. Small business rate relief rarely helps because most rateable care homes are worth more than £15,000. In England, care homes pay the ordinary multipliers, not the lower retail, hospitality and leisure ones.

England, 2026/27

• Multipliers: 43.2p below £51,000 rateable value; 48p from £51,000 to £499,999; 50.8p at £500,000 or more. Care homes aren't among the qualifying retail, hospitality or leisure uses (the hotel category in the law is limited to places with no significant nursing care).
• Charitable rate relief: up to 80% off if the home is used mainly for charitable purposes by a charity or its trustees. The council may top it up with discretionary relief and may ask for your charity registration number. You can't get it alongside small business rate relief.
• Small business rate relief: nothing to pay at £12,000 or less, tapering to nothing at £15,000, usually for one property only. It may help a very small home, or one where only a small part is rateable.
• Transitional relief and supporting small business relief limit increases after the 2026 revaluation; see our 2026 revaluation guide.

Worked examples (England)

These include the 1p transitional relief supplement most properties already in the rating list pay in 2026/27. Properties getting transitional relief or supporting small business relief, and new entries, don't pay it.

Simplified illustrations with made-up rateable values. You can try your own figures in our business rates calculator or see each step in how business rates are calculated.

Changes announced for 2027/28

Announced at the Budget on 28 October 2026 and due from 1 April 2027, subject to regulations: the standard multiplier becomes 49.7p and the small business multiplier 44.7p, and the 1p transitional relief supplement continues. The inflation cap and higher small business relief thresholds announced for retail, hospitality and leisure properties don't apply to care homes.

Wales

The same domestic and composite rules, the same valuation methods and the same disability exemption apply in Wales. The bill side differs. Care homes pay the standard multiplier of 0.502, or the higher multiplier of 0.515 if the rateable value is above £100,000: Wales exempts hospitals, surgeries and health centres from the higher multiplier, but the list doesn't include care or nursing homes. Charitable relief is 80% for homes occupied by a registered charity and used for charitable purposes, with up to 100% possible at the council's discretion. Welsh small business rates relief gives full relief up to £6,000, tapering to nothing at £12,000, but charities can't get it. Since 1 April 2026 you must tell the council within 60 days when you become the ratepayer or the home becomes occupied or empty.

A Welsh example with a made-up figure: a care home with a rateable value of £90,000 pays £90,000 × 0.502 = £45,180 before relief, or £9,036 if it gets 80% charitable relief.

What happens if a care home or part of it closes?

A wholly empty care home gets three months free from business rates in England and Wales, then usually pays full rates. If one wing closes, the domestic and business split and the rateable value may need reviewing, and the council may offer short-term relief on the empty part.

Closures are a reality in the care sector, and the rates position depends on what closes:

• The whole home: empty property relief gives three months free, then full rates on the ordinary multipliers. In England, a charity-owned home stays free only if its next use will be mostly charitable; in Wales charities must meet similar conditions. Listed buildings stay free until reoccupied.
• A wing or floor: tell the council. In England and Wales councils have discretion to reduce the bill where part of a property is empty for a short time. If the wing is closed long term, raise a check so the VOA can look again at the split and floor area.
• Refurbishment: in England, if the building can't be used while works go on, tell the Valuation Office through your valuation account. If it agrees, you won't pay business rates until it can be used again.

A change of care type matters too. Moving from long-stay residential care to mainly respite or step-down beds may turn domestic space into business space; moving the other way may do the reverse. Report changes so you don't face a backdated bill.

When might it be worth challenging a care home's rates?

A challenge may be worth considering if long-stay rooms have been treated as business space, the floor area or specification is wrong, the method doesn't suit the building, or an exemption hasn't been considered. You can check and challenge free yourself, or use a rating surveyor.

Care home cases tend to turn on facts more than on rates per square metre: who lives in which rooms, for how long, and what care is given there. That makes good records important. Occupancy and admissions records, care plans that show length of stay, floor plans marked up with each room's use, and photos all help.

The process is Check, then Challenge, then Appeal to the Valuation Tribunal for England or for Wales. You must raise a check first, even if you only disagree with the value, and then challenge within four months of the check decision with your evidence, a statement and the rateable value you think is right. The value can go up as well as down: if the VOA looks again and decides more of the home is business space, the bill could rise. Our guide to challenging business rates covers each stage and time limit.

You can do all of this yourself, free, through your business rates valuation account. Some operators prefer a rating surveyor because:

• the domestic and non-domestic boundary is a legal question as much as a valuation one;
• cost-based valuations need technical evidence on building costs and obsolescence;
• evidence has to go in at the check and challenge stages to be used later.

No outcome is guaranteed. Agree any fees in writing before work starts. For background on what a rateable value represents, see what is rateable value?

Related guides

Business rates for care homes: frequently asked questions

Sources

We checked the facts on this page against these official sources on 12 November 2026:

• Rating Manual: Hospitals and healthcare (incl. nursing homes)
• Business rates relief (charitable relief, exempt properties, empty property)
• Estimate your business rates
• Details of the Budget package and the multipliers for 2027/28
• Non-domestic rates multipliers (Business Wales)
• Business rates in Wales (Business Wales)

This guide is general information for properties in England and Wales, not advice. Business Rates Hub is an independent guide. We are not your council, the Valuation Office Agency (VOA) or any government service. You can check and challenge your rateable value yourself, free of charge, through the government's business rates valuation account.

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