Business water rates explained: VAT, Scotland and costs

What are business water rates?

Business water rates are the charges a business pays for its water supply and for taking away its wastewater. They're separate from business rates, which your council charges on most non-domestic properties, although unmetered water charges are usually based on the value of your property too.

Your bill has two parts:

• Wholesale charges, for supplying the water and taking away the wastewater. The regional water company, or companies, for your area set them for each charging year, which runs from 1 April to 31 March.
• Retail charges, for billing, meter reading and customer service, set by your retailer.

In England, Ofwat regulates the wholesale prices, and retailers set their own prices on top. If you don't switch or agree a new deal, Ofwat limits the price you pay. The government plans to replace Ofwat with a new water regulator, but until that body is set up, Ofwat keeps its full powers.

Most businesses in England and Scotland can choose their retailer, while their regional water company still supplies the water, so it's worth comparing business water rates and suppliers.

How are business water rates calculated?

In England and Wales, a business water bill can include the charges in the table below. Each water company publishes its own charges scheme, and must do so by 1 February, so what you pay depends on where you are.

What's on a business water bill in England and Wales

Because wastewater is charged on the water you use, not on what actually goes down the drain, the allowances further down this page are worth checking.

Business water rates in Scotland

Scotland's business water market has been open since 1 April 2008. Scottish Water supplies the water and takes away the wastewater, and businesses pay their charges to one of the providers licensed by the Water Industry Commission for Scotland (WICS). Business Stream, Scottish Water's own retail company, is one of them.

A Scottish business water bill has six parts: a fixed water charge, a charge for the water you use, a fixed wastewater charge, a charge for your wastewater, property drainage and roads drainage.

• Metering is the default. Businesses are charged on a meter unless that isn't practical. Without one, water and sewerage charges are based on your property's rateable value.
• Wastewater is charged on 95% of the water your meter records.
• Property drainage is based on rateable value by default, and only applies if your property drains to the public sewer.
• Roads drainage is charged to all eligible premises, as Scottish Government policy.

Scottish Water's published wholesale charges show each of its business charges rising by about 8.7% from 1 April 2026, compared with 2025-26.

WICS also sets maximum prices for the default tariffs that licensed providers must offer. For 2026-27, the most a licensed provider can charge on the default tariff for water, for a standard metered connection with a meter of 20mm or smaller, is £208.24 a year per connection, plus £3.1242 per cubic metre for the first 25 cubic metres a year at a site and £1.1718 for each cubic metre after that. A licensed provider can charge less than these maximums.

Charities and community amateur sports clubs that qualify can be exempt, or get a 50% reduction, under the Water and Sewerage Charges Exemption Scheme. Other business customers fund it through charges 1.5% higher.

Business water in Wales and Northern Ireland

Wales. The rules depend on your water company's area. If it's wholly or mainly in Wales, a business can choose its retailer only if a site uses at least 50 million litres a year, and only for water, not wastewater. Dŵr Cymru Welsh Water assumes about 95% of the water its business customers use returns to the sewer.

Northern Ireland. NI Water supplies every business, and businesses can't choose another supplier. All non-domestic customers pay for their water, while household charges remain deferred. For 2026-27, NI Water's non-domestic charges rose by a weighted average of 7.9%. Sewerage is normally charged on the assumption that 95% of your water returns to the sewer, and businesses that pay rates can apply for a domestic allowance against their measured charges.

Do businesses pay VAT on water rates?

Only in some cases. Under HMRC's rules, water is zero-rated, with a few exceptions. The main one for businesses is water used for a "relevant industrial activity": any activity in Divisions 1 to 5 of the 1980 Standard Industrial Classification. Water for those activities is charged at 20%.

VAT on business water and sewerage

The five divisions are:

1. energy and water supply industries;
2. extraction of minerals and ores other than fuels, and manufacture of metals, mineral products and chemicals;
3. metal goods, engineering and vehicles industries;
4. other manufacturing industries, which include food and drink manufacturing;
5. construction.

This is the 1980 classification, not the SIC code you may know from Companies House. Your water supplier decides which rate applies, and may ask you to confirm your main activity in writing.

Two more rules are worth knowing:

• Mixed use isn't usually split. If your water is used for both industrial and other activities, your main activity decides the rate for all of it. There's a narrow exception for water that's invoiced separately to a VAT-exempt part of an industrial business.
• Offices count too. Water supplied to an office of a business whose main activity is industrial is charged at 20%, even if nothing is made there.

Sewerage stays zero-rated even for industrial businesses. If you're VAT-registered and are charged 20% on water, you can reclaim it in the usual way. HMRC's old VAT Notice 701/16 on water and sewerage was withdrawn in 2016, and the rules now sit in its VAT Water and Sewerage Services manual. Electricity and gas follow different VAT rules, which our guide to VAT on business energy covers.

Are business water rates higher than household rates?

We haven't found an official comparison of what businesses and households pay per cubic metre. They're charged in different ways:

• Choice. Households in England and Wales can't choose their water company, while most businesses in England can choose their retailer.
• Large users. Larger business users may qualify for a large user tariff. Ofwat's rules say differences between charges for larger and smaller users must be based only on differences in cost.
• Social tariffs, which help people who would struggle to pay their bill in full, are designed for individuals.
• Scotland. Households pay water and sewerage charges with their council tax, linked to council tax bands, while businesses pay a licensed provider, mostly for metered use.
• Northern Ireland. Households don't pay water charges directly; businesses do.

For reference, CCW, the consumer body for water in England and Wales, reported that the average household water and sewerage bill was expected to rise by about £33, to £639, from 1 April 2026, and Scottish Water puts the average Scottish household bill at £532 for 2026-27. Neither figure applies to businesses.

What's the average business water bill?

We haven't found an official average for all business water bills in the UK, England or Scotland. What you pay depends on how much water you use, your meter, how your site drains, your region and your retailer's prices.

To see where you stand, add up a year of bills and divide the total by the cubic metres of water you used. That gives your cost per cubic metre, including the fixed charges, which you can set against quotes from other retailers. Our page on business water suppliers explains how to compare them.

Charges worth checking

• Water that doesn't reach the sewer. If less of your water goes down the drain than your water company assumes, because it goes into your product, evaporates or is used for watering, your retailer can apply for a return to sewer allowance. You'll need evidence, usually readings from sub-meters. The wholesaler should decide within 20 working days, and how far back an allowance can go varies between companies. In Scotland, a licensed provider can apply for a lower figure than 95%, which goes back to 95% if the occupier or the use changes.
• Surface water drainage. If no rainwater from your site enters a public sewer, for example because it drains to a soakaway, you can apply to your water company for a reduction, with evidence. Ofwat's rules require sewerage companies to offer one.
• Large user tariffs. If you use a lot of water, ask whether a large user tariff applies to you. Water companies plan to phase out falling block tariffs, which charge less per cubic metre as use rises, by March 2030.
• Your retailer's terms. In England and Scotland, you can compare retailers and move to another one.

How to complain about a business water bill

• England and Wales: complain to your retailer or water company first. If you're still unhappy once it has given its final response, or after eight weeks without one, CCW can help.
• Scotland: contact your licensed provider about your charges, or Scottish Water about its services. If you're still unhappy, go to the Scottish Public Services Ombudsman.
• Northern Ireland: complain to NI Water first. If you're unhappy with its response, you can ask for a review, and NI Water says you'll get a response within 10 working days. If you're still unhappy, the Consumer Council offers free advice.