Tax year: 2026/27 | Published: 24 September 2026 | Last reviewed: September 2026 | Written by the Epiclectic Editorial Team | Rates and wages sections reviewed by Shamayun Chowdhury

Starting a Business in London: Costs, Rates and Support (2026/27)

1. What’s the same, and what London adds

London is not a separate legal jurisdiction. Unlike Scotland, which sets its own income tax bands and has its own legal system, the capital follows the same national rules as the rest of England. What makes it different is the cost base and a layer of local regulation that exists nowhere else in the country.

Two of those points carry more weight than the rest. High rateable values change how national rates relief works in practice, and the two wage figures in circulation confuse a great many first-time employers. Both are covered in detail below.

If you are at the very start, read this alongside our national guide to starting a business in the UK, which covers the shared steps. We have a companion piece on what’s different in Scotland if you are weighing up locations.

2. Premises: the biggest London decision

For most London businesses, premises is the single largest fixed cost and the decision that shapes everything else, including your business rates bill. It is worth taking longer over it than feels comfortable.

What space costs

London office rent varies enormously by area. One workspace provider’s June 2026 breakdown put central London offices at roughly £40 per square foot in Stratford, rising to over £130 per square foot in Mayfair, and advised adding around 30% on top of headline rent to cover service charges and rates. Those are industry estimates rather than official figures, and rents move, so treat them as a guide to the spread rather than a quote.

The practical lesson is that the difference between zones can be a multiple, not a margin. A business that does not need a prestige postcode can often cut its largest fixed cost by more than half by moving a few stops along the same line.

The realistic options

Four checks before you commit

1. Look up the rateable value. It is published for every commercial property, and it determines your rates bill. Section 3 explains how to turn it into a figure.
2. Ask the council about licensing. Some London treatments and trades need a borough licence before you can open, and applications take time.
3. Add the invisible costs. Service charge, buildings insurance, utilities and repairs can add substantially to the headline rent.
4. Test the footfall yourself. Sit outside at the times you plan to trade, on different days. London footfall varies street by street in a way that averages never capture.

3. Business rates in London under the 2026 system

This section and Section 4 were reviewed for technical accuracy by Shamayun Chowdhury, Senior Accountant at Major Accountancy, Leicester. Figures apply to the 2026/27 financial year in England.

Business rates changed more on 1 April 2026 than they had in years, and the changes matter more in London than anywhere else. Two things happened at once: every commercial property in England was revalued, and the two-multiplier system was replaced with five.

How your bill is built

Your premises have a rateable value, set by the Valuation Office Agency. From 1 April 2026 those values are based on rental levels as at 1 April 2024. Your council multiplies that value by whichever multiplier applies to your property, then applies any relief you qualify for. The rateable value is not your bill.

The five multipliers for 2026/27

The two lower retail, hospitality and leisure multipliers replaced the temporary RHL discount that ran until March 2026, making the support permanent rather than renewed each year. They are funded partly by the higher multiplier on the largest properties. A one-penny transitional supplement also applies for one year from April 2026 to help fund transitional relief.

Whether you get an RHL multiplier depends on how the property is used, not simply on how it is described in the valuation list, and only occupied properties qualify. Shops, cafés, pubs, gyms, salons and similar consumer-facing premises generally do. An office, agency or professional practice generally does not.

Small business rate relief, and why London is different

Relief thresholds did not change with the revaluation. In England you pay nothing on a single property with a rateable value of £12,000 or less, relief then tapers away to nil at £15,000, and above that there is no small business rate relief at all, although the small business multiplier still applies below £51,000.

Worked examples

Illustrative calculations. Your actual bill depends on your property’s rateable value, its use, any transitional arrangements and reliefs applied by your borough.

Other reliefs worth asking about

• Transitional relief limits how quickly bills rise after a revaluation.
• Supporting small business relief caps increases for businesses losing other reliefs.
• Pubs and live music venues can claim a 15% relief for 2026/27, applied on top of other reliefs.
• Second premises: you now keep small business rate relief on your first property for three years after taking on a second, rather than one.
• Charitable and discretionary reliefs vary by borough.

Reliefs are administered by your borough, and several require an application. Contact the business rates team as soon as you take on premises rather than waiting for a bill to arrive.

4. Wages: two different numbers

This is where new London employers most often get confused, because two figures circulate and only one is compulsory.

Both figures appear in London job adverts, which is why candidates often expect the higher one. Some ranking pages state the 2026 London Living Wage as a much lower figure, so check the Living Wage Foundation’s own published rate before quoting it to staff or in an advert.

What this means for your budget

• Build wages from the real rate for your sector. In hospitality, retail and care, London employers frequently pay above the statutory minimum simply to recruit, whether or not they are accredited.
• Remember the on-costs. Wages are not your only staffing cost: employer National Insurance on earnings above the relevant threshold, pension contributions under automatic enrolment, and holiday pay all sit on top. Check the current rates and thresholds when you budget.
• Employers’ liability insurance is compulsory from the day you employ anyone.
• Consider accreditation deliberately. Paying the London Living Wage raises your cost per hour, and employers who do it usually cite lower turnover and easier recruitment. It is a commercial decision, not a compliance one.

5. Licensing that’s London-only

Most business regulation is national, but London has one layer that exists nowhere else in England, plus the usual borough-level rules. Licensing is also the step most likely to delay an opening date, so start it before you sign a lease.

Special treatment licences

Under the London Local Authorities Act 1991, most London boroughs require premises offering certain treatments to hold a special treatment licence from the council. The list typically covers treatments such as lasers and intense pulsed light, electrolysis, micropigmentation and semi-permanent make-up, massage and similar therapies. Premises where treatment is given by, or under the supervision of, a doctor registered with the General Medical Council can be exempt, as can premises run by certain exempt health bodies.

Two practical points. First, the detail varies between boroughs, so the same business can face different requirements on opposite sides of a borough boundary. Second, licensing usually involves an inspection of the premises, which means the fit-out has to satisfy the council before you can trade. Speak to the licensing team early and ask what standards they apply.

The other approvals to check

One rule of thumb: phone the borough before you commit to premises, describe exactly what you intend to do there, and ask which licences and registrations apply. It costs an hour and can save a lease.

6. Transport and vehicle costs

If your business uses a vehicle in London, road charges are a running cost that can rival a small rent. They changed at the start of 2026, and the change removed an exemption many businesses had relied on.

The Congestion Charge from January 2026

• The daily charge rose to £18 on 2 January 2026, up from £15, the first increase since 2020.
• Paying late costs more. A higher rate of £21 applies to payments made in the days after travel, so set up automatic payment if you enter the zone regularly.
• Electric vehicles now pay. The previous full exemption ended, replaced by discounts for vehicles registered for automatic payment: 50% for electric vans and heavy goods vehicles, and 25% for electric cars.
• Those discounts reduce again from March 2030, to 25% for vans and 12.5% for cars.
• Annual increases are expected, broadly in line with public transport fares.

The zone covers central London only, roughly from King’s Cross down to Vauxhall and from Paddington across to Tower Bridge, and it operates on specified days and hours. Check Transport for London’s map and hours against your actual routes before assuming you are affected.

ULEZ is separate

The Ultra Low Emission Zone is a different scheme with a different purpose and a much wider boundary. It charges a daily amount for vehicles that do not meet the emissions standards, and it can apply whether or not you enter the Congestion Charge zone. Check your registration on Transport for London’s vehicle checker and confirm the current daily charge there, since a compliant vehicle pays nothing at all.

What this means by business type

7. Free support in London

London’s support network is extensive and, at the small business end, largely free. It is also fragmented enough that many founders never find it. Start at the top of this list and work down.

One number puts the scale in context: London is home to around 981,000 small and medium-sized businesses, roughly 99.8% of all businesses in the city. You are not short of peers, competitors or people who have solved the problem you are facing.

8. Is London worth the premium?

London costs more on almost every line of a budget. Whether that is worth paying depends on what your business actually needs from a location.

London usually pays for itself when your customers are physically here and hard to reach elsewhere, when you need specialist staff, when footfall is the business model, or when being close to clients wins the work.

It often does not when you serve customers online or nationally, when the work is delivered remotely, or when the business is price-competitive and thin-margined. In those cases, a cheaper base with occasional travel into London frequently beats a London lease.

A middle route suits many founders: register and start from home or flexible space, prove demand, then take premises once the revenue justifies the rates bill. Section 2 covers those options, and our small business marketing guide covers reaching London customers without a London shopfront.

9. Common mistakes London founders make

• Signing before checking the rateable value. Crossing £15,000 turns a nil rates bill into a five-figure annual cost.
• Assuming rates relief applies automatically. Several reliefs need an application to your borough.
• Confusing the two wage figures. The statutory rate is compulsory; the London Living Wage is voluntary and higher. Budget for the rate your sector actually pays.
• Buying a van without checking the zones. Since January 2026, electric vehicles pay the Congestion Charge too, at a discount rather than free.
• Missing borough licensing. Special treatment licences and street trading permissions can take weeks and may require premises changes.
• Paying for advice that is free. Grow London Local and borough hubs cover most start-up questions at no cost.
• Choosing the postcode over the numbers. A prestigious address rarely wins work that a good proposal would not.
• Underestimating the ramp-up. London fixed costs arrive monthly from day one, while revenue builds slowly. Budget personal living costs for longer than feels necessary.

10. Case study: a mobile services business weighing the zones

11. Launch checklist

12. Frequently asked questions

Is it more expensive to start a business in London?

Usually, yes. National taxes and registration costs are identical, but rents are the highest in the UK, rateable values follow those rents, wage expectations are higher, and vehicle-based businesses face road charges. The trade-off is a much larger local customer base and deeper labour market.

Do I have to pay the London Living Wage?

No. The London Living Wage of £14.80 an hour is voluntary and set independently to reflect living costs in the capital. The rate you must pay is the statutory National Living Wage, £12.71 an hour for workers aged 21 and over from April 2026, with lower minimum rates for younger workers and apprentices.

What are the business rates multipliers for 2026/27?

England now has five. For 2026/27 they are 38.2p for small business retail, hospitality and leisure, 43.2p for other small business properties, 43.0p for standard retail, hospitality and leisure, 48.0p for other standard properties, and 50.8p for any property with a rateable value of £500,000 or more.

Do I need a special licence to run a business in London?

It depends on what you do. Most London boroughs require a special treatment licence for premises offering treatments such as lasers, electrolysis, micropigmentation and massage, under the London Local Authorities Act 1991. Food, alcohol, street trading and late-night operations have their own requirements, and the detail varies by borough.

Do I pay the Congestion Charge for business trips?

Yes, if your vehicle enters the central London zone during charging hours. The daily charge rose to £18 on 2 January 2026, with a higher rate for late payment. Electric vehicles no longer travel free: registered for automatic payment, electric vans and HGVs get a 50% discount and electric cars 25%.

Is there free business support in London?

Yes. Grow London Local, delivered by London & Partners, is the capital’s single front door for small business support and has helped more than 37,000 businesses since 2024. Many boroughs also run free workshops and advice, and the Business & IP Centre network offers free market research through libraries.

Should I register my company at a London address?

Only if it reflects where you actually operate or you have a genuine reason for it. A registered office address is a public record and does not by itself win customers. If you trade from home, a registered office service can keep your home address off the public register, but it will not change where your business rates or licensing obligations sit.

13. Sources

• GOV.UK: Business rates
• GOV.UK: Small business rate relief
• Valuation Office Agency: find and check your rateable value
• GOV.UK: National Minimum Wage and National Living Wage rates
• Living Wage Foundation: London Living Wage
• Transport for London: Congestion Charge
• Transport for London: Ultra Low Emission Zone
• legislation.gov.uk: London Local Authorities Act 1991, Part II
• Grow London Local (London & Partners)