A charity that occupies premises used wholly or mainly for charitable purposes gets mandatory charitable rate relief of 80% off its business rates bill. The council can add discretionary relief on top, up to the full remaining 20%, so the charity pays nothing. The relief belongs to the occupier: the charity, or its trustees, must be the ratepayer, and the premises must pass the wholly or mainly test on each day.
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Where does the relief come from?
In England and Wales, business rates are charged under the Local Government Finance Act 1988 (LGFA 1988) on the occupier of a property shown in the local rating list (section 43). Since 1 April 2024, the reliefs that reduce the daily charge for an occupied property have been set out in Schedule 4ZA to the Act, inserted by the Non Domestic Rating Act 2023. Charitable rate relief is in paragraph 2 of that Schedule. Discretionary relief, which councils use to top up the mandatory relief, is in section 47. Scotland and Northern Ireland have their own rating systems, which this page does not cover.
GOV.UK describes the result in plain terms: charitable rate relief gives up to 80% off the bill, and the local council may top up the discount with discretionary relief so that no business rates are payable. For how the bill itself is worked out, see business rates explained.
Who qualifies for the mandatory 80%?
Paragraph 2(2) of Schedule 4ZA applies on any day when either:
- the ratepayer is a charity or trustees for a charity, and the property is wholly or mainly used for charitable purposes, whether of that charity alone or of that charity and other charities; or
- the ratepayer is a registered community amateur sports club under Chapter 9 of Part 13 of the Corporation Tax Act 2010, and the property is wholly or mainly used for the purposes of that club, or of that club and other registered clubs.
Section 67(10) defines a charity as an institution or other organisation established for charitable purposes only, or the persons administering a trust established for charitable purposes only. The council may ask for proof, such as a charity registration number. A sports club must be registered with HMRC as a community amateur sports club; see community amateur sports clubs.
Two points follow from the wording. First, the relief depends on who the ratepayer is. A trading subsidiary is normally a company established to make profits for its parent charity, not for charitable purposes only, so if the subsidiary occupies the shop or café, it is the ratepayer and paragraph 2 does not apply; see charity trading and subsidiaries. Second, the test is applied day by day, so a change of use part way through the year changes the relief from that day.
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What does “wholly or mainly used for charitable purposes” mean?
The Act does not set a percentage. The question is whether the use of the property as a whole is mainly for the charity’s purposes, which in practice means looking at how the space and time are actually used: offices used to administer the charity, a hall used for its activities and a store holding goods it distributes are typical examples of charitable use. A property mainly let out to others, or mainly used for commercial activity unconnected with the charity’s purposes, is at risk.
Charity shops get specific protection. Section 64(10) LGFA 1988 says a property is treated as wholly or mainly used for charitable purposes if it is wholly or mainly used for the sale of goods donated to a charity and the proceeds, after expenses, are applied for the purposes of a charity. A shop that sells mainly bought in new stock does not get the benefit of this rule.
How does the discretionary top up work?
Under section 47 LGFA 1988, the billing authority can decide that a lower chargeable amount applies to a property. The determination must reduce the bill, can reduce it to nil, and can be varied or revoked by a later decision. This is the power councils use to remove the remaining 20% for charities.
Section 47(5B) identifies the bodies that councils have a free hand to help: properties occupied for organisations not established or conducted for profit whose main objects are charitable or otherwise philanthropic or religious or concerned with education, social welfare, science, literature or the fine arts, and properties used wholly or mainly for recreation and occupied by a non profit club or society. For other cases, section 47(5A) allows relief only if the council is satisfied it is reasonable having regard to the interests of its council tax payers. Councils in England must have regard to guidance issued by the Secretary of State, and councils in Wales to guidance from the Welsh Ministers.
Because the top up is discretionary, each council sets its own policy. GOV.UK also notes that a non profit or voluntary organisation that is not a charity may still be able to get discretionary relief, and that the council decides whether any other relief can be combined with charitable relief.
Can charitable relief be combined with small business rate relief?
No. GOV.UK states that a ratepayer cannot get charitable rate relief and small business rate relief at the same time, and the council decides which applies. Small business rate relief removes the bill entirely where the only property used has a rateable value of £12,000 or less, so for a small charity with one modest property it can be worth more than 80%, and it is worth asking the council to compare.
Are private schools still entitled?
Not in England. Paragraph 2(3) of Schedule 4ZA, inserted by the Non Domestic Rating (Multipliers and Private Schools) Act 2025 for financial years beginning on or after 1 April 2025, removes charitable rate relief from property in England used wholly or mainly for a private school. A private school broadly means a fee charging school providing full time education to pupils of compulsory school age, or a mainly fee charging institution providing full time education to students over compulsory school age but under 19, other than nursery schools and certain training providers. Schools wholly or mainly concerned with educating pupils who have an education, health and care (EHC) plan are excluded from the restriction. Wales made a similar change for independent schools from 1 April 2025 through paragraph 2A, with an exception for schools mainly educating pupils with an individual development plan.
What about empty charity premises?
Empty property relief normally removes rates for only 3 months after a property becomes empty. GOV.UK lists property owned by a charity as able to get extended relief, but only if the property’s next use will be mostly for charitable purposes. The same applies to a community amateur sports club whose next use will be mostly as a sports club.
How does the arithmetic work?
Illustration only. A registered charity occupies a building whose rates bill before reliefs would be £10,000 for the year.
| Step | Amount |
|---|---|
| Bill before relief | £10,000 |
| Mandatory charitable relief at 80% | £8,000 |
| Bill after mandatory relief | £2,000 |
| Discretionary top up granted at 50% of the remainder | £1,000 |
| Amount payable | £1,000 |
If the charity then lets half the building to a commercial tenant for most of the year, the council may decide the property is no longer wholly or mainly used for charitable purposes, and the whole 80% can fall away from the date of the change, not just half of it.
What mistakes come up most often?
- The wrong body holds the lease. If a trading company or a non charitable associated body is in occupation, it is the ratepayer and the mandatory relief is not available.
- Assuming the relief is automatic. Relief is applied by the local council, which may ask for evidence of charitable status, so the charity needs to apply.
- Not reporting changes. GOV.UK warns that if circumstances change, the new rate usually applies from the day of the change, which can mean a backdated bill.
- Charity shops selling mainly new goods. Section 64(10) protects shops selling donated goods, not general retail.
- Forgetting the top up has to be asked for. Discretionary relief depends on each council’s policy and can be revoked.
Charitable relief is separate from the VAT reliefs available to charities; see VAT reliefs for charities.
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Related Accountapedia entries
- IHT exempt gifts to charities, parties and national bodies
- Business rates for pubs, hotels and shops from 2026
- Charitable trusts: tax exemptions and conditions
- VAT on donated goods sold by charities
- Holiday lets: business rates or council tax
Sources
- GOV.UK: Charitable rate relief
- legislation.gov.uk: Act 1988 c. 41, section 43
- legislation.gov.uk: Act 1988 c. 41, schedule 4ZA
- legislation.gov.uk: Act 1988 c. 41, section 67
- legislation.gov.uk: Act 1988 c. 41, section 64
- legislation.gov.uk: Act 1988 c. 41, section 47
- GOV.UK: Small business rate relief
- GOV.UK: Empty property relief
Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.