Business rates for hotels: double bed units, room income and your rateable value

How are hotels valued for business rates?

It depends on the size and type of hotel. The VOA values small independent hotels by comparison with rents, at a set value per double bed unit, and values large independent and chain hotels on fair maintainable trade, applying a percentage to the trade a reasonably efficient operator could expect.

A rateable value is meant to be the yearly rent a hotel would let for on 1 April 2024. Few hotels are let on simple open-market rents: at the small end, many are run as a way of life as much as for profit, and at the large end many rents are sale-and-leaseback or management deals. So the VOA uses two broad approaches.

Between those, the VOA's Rating Manual uses rules of thumb. Outside central London, a hotel with 20 to 50 bedrooms is likely to be valued on trade if it has a bar and restaurant, but on double bed units if it is mostly bedrooms and a reception. A small boutique or luxury hotel can be valued on trade even under 20 bedrooms. So the first thing to check is which method has been used, and whether it fits how your hotel actually operates.

What is a double bed unit and how is it counted?

A double bed unit (DBU) is the VOA's way of comparing hotels with different room mixes. A double or twin room, including king beds, counts as one DBU. Other rooms are converted using standard factors, and rooms without en-suites or up stairs with no lift count for less.

GOV.UK gives a simple illustration: if a hotel let for £10,000 a year and had 10 double bed units, the value would be £1,000 per unit, and that figure can be applied to similar hotels in similar locations. Your rateable value then depends heavily on how many DBUs the VOA has counted.

The VOA's standard factors (en-suite rooms)

Adjustments that reduce the count

• No en-suite: take 0.25 off the factor, so a double without its own bath or shower and WC counts as 0.75.
• No lift: rooms on the second floor or in a basement with no passenger lift are reduced by 15%; rooms on the third floor and above with no lift by 25%.
• Room layout and actual use decide how a room is classed, not what it is called on a booking site.

For guest houses, the VOA's basic DBU price assumes en-suite facilities and central heating, and covers the normal shared areas such as a residents' lounge and dining room.

How does room income affect a larger hotel's rateable value?

For larger and chain hotels the VOA applies one percentage to total fair maintainable trade. Rooms are the most profitable income, so the percentage is higher where room income per double bed unit is high and where rooms make up a bigger share of turnover, and lower where food, drink and other income make up more of it.

Fair maintainable trade is the yearly trade, excluding VAT, that a reasonably efficient operator could expect to achieve at 1 April 2024, looking forward from that date. The VOA asks hotels to split receipts into rooms, food, drinks and other income (such as function rooms, conferences and leisure).

The 2026 scheme then works like a grid. First the VOA decides the class of hotel by its level of service (budget and lodge, standard 3 and 4 star, or higher service top 4 and 5 star, with separate scales for central London and for lodges and aparthotels). Then it reads off a percentage range using two measures:

• Room yield: accommodation receipts per double bed unit.
• Room income proportion: accommodation receipts as a share of total turnover.

The higher both are, the higher the percentage. A hotel where weddings, the restaurant and the bar bring in a large share of the money will usually sit lower, because that trade is less profitable. As one example from the scale, a standard 3 or 4 star provincial hotel taking £35,000 of room income per DBU, with rooms making up 70% of turnover, falls in a range of about 8.2% to 10.6% of FMT.

Where in the range?

The VOA then decides where the hotel sits within the range, looking at things such as construction and layout (an old, sprawling building on several levels costs more to run), size, the level of service, and ancillary facilities. If "other" income such as conferences, leisure or weddings is clearly more than 10% of the total, the VOA recalculates the room proportion without it, which can push the percentage up.

Does a seasonal hotel or B&B get a lower rateable value?

A rateable value is always an annual figure, so a seasonal hotel isn't charged only for the months it is busy. Seasonality is reflected in the evidence: lower annual room income per double bed unit, local rents for similar resort hotels, and the trade a reasonably efficient operator could expect over the whole year.

The VOA's guidance notes that hotel demand is driven by tourists and business travellers, and its DBU scales for small hotels work best in places with many similar hotels close together, such as seaside towns. That matters for seasonal businesses: check that your hotel has been compared with similar hotels in a similar location, not ones with a different trading pattern.

• Trade-valued hotels: a quiet winter shows up as lower annual room income per DBU, which can put the hotel lower on the scale.
• Small hotels: the local £ per DBU should already reflect the trading pattern of comparable hotels nearby. If you have been compared with hotels in a busier location, that is worth questioning.
• B&Bs used as a family home part of the year: the VOA's guidance says only the non-domestic potential is valued, and the family's own use is left out. How that split has been made can be worth checking.

The VOA guidance also says the FMT should not simply be an average of past years: it is what a tenant would have expected at 1 April 2024, looking forward. If your trading pattern changed for reasons that would affect any operator, explain them when you give trade figures or raise a check.

Do small B&Bs and owners' living quarters pay business rates?

Not always. A B&B stays domestic (council tax, not business rates) if the owner intends to let short-stay accommodation to no more than six people at a time, lives there as their only or main home, and the letting is secondary to that home use. In bigger hotels, staff flats and the owner's house are domestic, so the property is split.

Under the Local Government Finance Act 1988, short-stay accommodation such as hotels and guest houses is rateable, but certain small B&Bs are kept out. Both conditions have to be met:

1. it is intended that over the coming year short-stay guests won't be provided for more than six people at the same time; and
2. the owner intends to live there as their sole or main residence, with the guest use secondary to that.

The VOA counts adult bed spaces, not including the family's own beds or cots. Signs that the guest use is no longer secondary include more of the house given over to guests than kept for the family, a bar or licensed restaurant in the same property, or adaptations beyond those of an ordinary house, such as en-suites in every room and fire doors.

In larger hotels, the VOA's guidance says any house within the grounds and any staff flats or rooms are domestic, making the hotel a composite property: the domestic parts pay council tax and the rest pays business rates. If the owner's flat or staff rooms have been counted as letting bedrooms, raise a check.

What mistakes should I look for in a hotel valuation?

Look at the number and type of bedrooms, en-suites and lifts, the class of hotel, whether the right method was used, the trade split between rooms and other income, how a leisure club or concession is treated, and whether domestic areas have been left out.

Add the hotel to your business rates valuation account, open the valuation details and go through them against the hotel as it was on 1 April 2024 (or as it is now, if it has changed since):

1. Bedrooms and DBUs: the right mix of singles, doubles, family rooms and suites; rooms without en-suites; rooms above the first floor with no lift.
2. Method: a small bedrooms-only hotel valued on trade, or a hotel with a busy bar and restaurant valued on DBUs, could be on the wrong basis.
3. Class of hotel: star ratings are only a guide; the VOA looks at the level of service. A modest 3 star hotel shouldn't sit on a higher-service scale.
4. Trade split: rooms, food, drinks and other income allocated correctly, excluding VAT. Coach tour hotels often have room income worked out from a package price, which the VOA treats as unreliable on its own.
5. Leisure club or spa run by someone else: if you receive a rent or franchise fee rather than the gross takings, the VOA guidance values that income stream separately, at 25% to 50%, not as part of total trade.
6. Conference hotels: the 2026 scheme allows a 2% FMT adjustment for older hotels with outdated conference facilities that meet set conditions, including having had a conference allowance in the 2023 list.
7. Pub or hotel? An inn with rooms can be valued as a pub or as a hotel. As a rough guide in the VOA's manual, room income above 40% of receipts points to a hotel and below 30% to a pub. See our pubs guide for how the pub basis works.
8. Domestic parts: owner's or manager's accommodation and staff rooms left out of the business valuation.

Do I have to fill in the VOA's hotel trading form?

If the VOA sends a VO 6015 form for hotels, you must return it within 56 days or you could face a £100 penalty. The figures you give feed straight into your hotel's fair maintainable trade, so it pays to be accurate and to keep a copy.

The VO 6015 form is mainly sent to 4 and 5 star and major chain hotels and asks for accounts information, with receipts split between rooms, food, drinks and other income. Where trade details aren't given, the VOA estimates FMT from older information on file and comparable hotels nearby, which may not suit you.

• Give figures excluding VAT and split them as the form asks.
• Explain anything unusual, such as a refurbishment closure, a change of operator or a one-off event.
• Keep a copy. If you later challenge, you can only rely on evidence you put in at the check and challenge stages.

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

In England in 2026/27 hotels pay the lower retail, hospitality and leisure (RHL) multipliers if their rateable value is under £500,000. Small business rate relief, transitional relief and supporting small business relief may also apply. Hotels don't get pub relief in England or Food and Drink Hospitality Rates Relief in Wales.

England, 2026/27

• RHL multipliers: 38.2p below £51,000 rateable value; 43p from £51,000 to £499,999. Any property at £500,000 or more pays 50.8p. The law defines qualifying uses to include hotels, boarding houses and guest houses where no significant nursing care is provided.
• Small business rate relief: nothing to pay at £12,000 or less, tapering to nothing at £15,000, usually for one property. That mainly helps small guest houses.
• Transitional relief and supporting small business relief limit how fast bills rise after the 2026 revaluation. Our 2026 revaluation guide explains the caps.
• Empty property: an empty hotel gets three months free, then pays full rates, and on the ordinary (not RHL) multipliers.

Worked examples

Simplified illustrations: transitional or supporting small business relief could reduce these. You can try your own figures in our business rates calculator.

Changes announced for 2027/28

Announced at the Budget on 28 October 2026 and due from 1 April 2027, subject to regulations: RHL multipliers of 39.5p and 44.5p (high-value 52.5p); bills for qualifying RHL properties capped by inflation in 2027/28 and 2028/29 (not for increases caused by improvements or losing other reliefs); and small business rate relief for qualifying RHL properties extended to full relief up to £18,000, tapering to £21,000. On those figures the small hotel above, at £17,475, could get full small business rate relief if it meets the other conditions.

Wales

Wales has no hotel-specific relief. Hotels pay the standard multiplier of 0.502, or the higher multiplier of 0.515 above £100,000 rateable value; the lower retail multiplier is for shop-type descriptions, not "hotel and premises". Food and Drink Hospitality Rates Relief excludes hotels, guest houses and holiday lets. Welsh small business rates relief gives full relief up to £6,000, tapering to nothing at £12,000. Business Wales says the lower multiplier is due to extend to some visitor accommodation descriptions from 1 April 2027, with rates set in the Welsh budget. You must tell the council within 60 days when you become the ratepayer or the property becomes occupied or empty.

Is the way hotels are valued going to change?

Possibly, but not for the current list. The government launched an independent review of pub and hotel valuations in August 2026, due to report by the end of March 2027 so recommendations can be used at the next revaluation. Your 2026 rateable value is still worked out on the current scheme.

The Valuation Methodology Review for Pubs and Hotels, led by Jerry Schurder, ran a call for evidence that closed on 16 October 2026. The government said both sectors saw significant rises at the 2026 revaluation, largely because pandemic-era valuations ended. Waiting for the review won't change your 2026 rateable value, so if you think the facts or figures are wrong now, the check and challenge time limits still apply.

When might it be worth challenging a hotel's rateable value?

A challenge may be worth considering if the VOA has the wrong bedroom count or room types, has used the wrong method or class of hotel, has misallocated trade between rooms and other income, or has included domestic areas. You can do it yourself for free or use a rating surveyor.

Because the 2026 hotel scheme was agreed with UKHospitality and ratepayers' agents, arguing that the whole scale is wrong is unlikely to get far. Strong hotel cases tend to be about how the scheme was applied to your hotel: the facts behind the DBU count, the trade figures, the class of hotel and where it sits in the range, or the comparables used for a small hotel.

The steps are Check, Challenge, then Appeal to the Valuation Tribunal for England or for Wales. You must raise a check first (room numbers and facilities are exactly the kind of detail a check corrects), 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 down, up or stay the same, and you keep paying meanwhile. Our guide to challenging business rates covers the time limits in full, and the "Find a business rates valuation" service on GOV.UK shows summary valuations of nearby hotels.

You can do all of this yourself, free, through your valuation account. Some hoteliers use a rating surveyor because:

• the trade-based scales and DBU rules are technical and evidence has to go in first time;
• surveyors know how comparable hotels in your area have been valued;
• they track the deadlines while you run the hotel.

No challenge is guaranteed to succeed. Agree any surveyor's fees in writing before they start.

Related guides

Business rates for hotels: frequently asked questions

Sources

We checked the facts on this page against these official sources on 11 November 2026:

• How hotels are valued for business rates
• Rating Manual: Hotels
• Rating Manual: Guest and boarding houses
• Estimate your business rates
• Details of the Budget package and the multipliers for 2027/28
• 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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