Business rates can seem confusing and daunting, but they don’t have to be.
It’s likely that you’ll have to pay business rates if you use all or part of a building for commercial purposes opens in new window.
In this guide we break down what business rates are and how you can reduce them.
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What are Business Rates?
Most businesses in the UK are charged business rates, which are a tax based on the open market rental value of the property that the business occupies, paid to your local authority.
The amount of business rates that a business has to pay can vary depending on the size and location of the property, as well as the type of business that is being run.
Business rates are charged on most non-domestic properties, like shops, offices, pubs, warehouses, factories, holiday rental homes, or guest houses.
Certain types of property are exempt from business rates, such as farm buildings or places used for the welfare of disabled people.
Business rates are used to fund public services by your local authority and so they play an important role in supporting companies and ensuring that they can thrive.
The business rates bill for the following tax year will be sent to you by your local council in February or March each year.
If you have questions about your bill, you can get help from your council.
You can also estimate your business rates bill opens in new window.
If you think your ‘rateable value’ is wrong, you can get help from the Valuation Office Agency (VOA) opens in new window.
What is a rateable value?
The amount of business rates you have to pay is based on your property’s ‘rateable value‘.
This is the property’s open market rental value on the 1st of April 2015, as estimated by the VOA.
You can estimate your bill by multiplying the rateable value by the correct ‘multiplier’.
The multiplier is an amount set by central government.
In order to calculate your property’s rateable value, the VOA may request that you provide rental information opens in new window.
The rateable value is calculated differently if your property is in Northern Ireland or Scotland.
Business rates relief
You may be able to get business rates relief from your local council to reduce your bill.
This is sometimes automatic, but you may need to apply.
The process also depends on whether your property is in England or Wales.
You may also be eligible for relief if you’re a charity, a community amateur sports club, or a social enterprise opens in new window.
If you think you might be eligible for relief, you should contact your local authority.
What is Small business rate relief?
Smaller businesses may be eligible for small business rate relief, which can reduce the amount of business rates that they have to pay.
If your property’s rateable value is less than £15,000, you may be eligible for the discount.
To apply, you will need to contact your local council.
A 100% discount is available to businesses that occupy property with a rateable value of £12,000 or less.
If your rateable value is between £12,001 and £15,000, you will still be eligible for relief, but the amount you receive will be reduced gradually from 100% to 0%.
For example, if your rateable value is £13,500, you will receive 50% off your bill.
If your rateable value is £14,000, you will receive 33% off.
What is Supporting small business relief
The Supporting Small Business Relief scheme is designed to offer financial protection for small businesses facing significant increases in their business rates due to changes in valuation.
Specifically, for the 2023 Revaluation period, the scheme ensures that any small business losing partial or full eligibility for Small Business Rates Relief or Rural Rate Relief will not see their bills increase by more than £600 annually.
This relief mechanism was initially introduced during the 2017 revaluation to assist businesses grappling with substantial rate hikes exceeding the limits set by Transitional Relief, particularly those affected by the discontinuation of Small Business Rates Relief or Rural Rate Relief.
Essentially, it acts as a buffer for ratepayers, ensuring a gradual adjustment to their new billing amounts.
You can find out more and apply for Supporting Small Business Relief by contacting your local authority.
What if my business has more than one property?
If you’re thinking of expanding your business opens in new window by purchasing a second property, you’ll be glad to know that you can still receive small business rate relief on your main property for 12 months.
Of course, you’ll still need to meet the eligibility requirements for small business rate relief such as making sure none of the rateable values of your other properties exceed £2899.
You’ll also need to ensure that the total rateable value of all your properties is less than £20,000 (£28,000 in London).
But as long as you keep that in mind, you should be able to take advantage of this tax break opens in new window and get a head start on growing your business.
What to do if your business rateable value is more than £15,000
Providing your business has a rateable value below £51,000, your bill will be calculated using the small business multiplier, which is lower than the standard one.
The small business multiplier for 2021/2022 is 49.9p, while the standard multiplier is 51.2p.
In the City of London, the multipliers may be different but, regardless of where your company is located, you could save money on your rates by taking advantage of this relief.
Small business rates relief and working from home
If you’re running your business from home opens in new window, you are usually eligible for Small business rate relief.
This means you won’t have to pay business rates on the part of your property that you’re using for work or if you sell goods by post.
There are other circumstances in which you may need to pay business rates, even if you’re running a home-based business.
For example:
- if you sell goods or services to people who visit your property
- if you employ other people opens in new window to work at your property
- if you’ve made changes to your property to accommodate your business (such as converting a garage into a studio)
- you may also need to pay business rates if your property is part domestic and part business like if you live above a shop.
If you’re not sure whether or not you need to pay business rates, you can contact the VOA opens in new window for advice.
In Scotland, contact your local assessor opens in new window.
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Reference to any organisation, business and event on this page does not constitute an endorsement or recommendation from the British Business Bank or the UK Government. Whilst we make reasonable efforts to keep the information on this page up to date, we do not guarantee or warrant (implied or otherwise) that it is current, accurate or complete. The information is intended for general information purposes only and does not take into account your personal situation, nor does it constitute legal, financial, tax or other professional advice. You should always consider whether the information is applicable to your particular circumstances and, where appropriate, seek professional or specialist advice or support.
