With the new financial year approaching, you’ll probably be expecting a new bill from your local council. It may be one of your biggest expenses as a business, so it’s important to make sure that you’re taking advantage of any discounts you might be entitled to. And if you want to do that, you need to have at least a basic understanding of how business rates work.
This post introduces you to the basics of rates, but it’s not intended as legal or professional advice. And it’s not a comprehensive guide. For more information and details on business rates, including where to get professional advice, please visit the HMRC website.
How are they calculated?
1. Rateable value
Business rates are based on the value of your business premises. The Valuation Office Agency (VOA) decides the ‘rateable value’ of a property by seeing what the cost of one year’s rent would be on the market. But they don’t use the current value of the property. To ensure fairness, the VOA prices every business premises on the same date, and uses that figure until the next revaluation.
For example, the rateable value of any property used for this year’s calculations is based on the cost of renting it for a year on 1 April 2008.
Once your property’s rateable value has been worked out, the council applies a multiplier, also known as the Uniform Business Rate (UBR). This is really just a percentage: it tells you how much of the rateable value your business will have to pay.
For instance, the current standard multiplier for this year in England is 48.2 pence in the pound. That means that your business rates bill – before any relief – will be 48.2% of the property’s rateable value. So if your business occupied premises with a rateable value of £16,000, you’d have to pay a bit less than half – £7,712.
Multipliers typically vary between standard and small businesses, and between different parts of the UK. They also usually change each year according to inflation, so it’s worth keeping up to date with the official government websites.
Am I eligible for any discounts?
You might be if your only premises have a low rateable value – currently less than £12,000. In this case you’re probably entitled to a percentage discount on your bill. As of 2015, a business with a rateable value of £6,000 or less pays no business rates, and one with a rateable value of £10,000 would get only a partial discount. In fact, even if your rateable value is between £12,000 and £17,999, you’ll be considered a small business, and you’ll have a special multiplier which is slightly lower than the standard one.
You could also be eligible for a discount if you’re considered a retail business. If your business is a shop, restaurant, or similar, and your rateable value is less than £50,000, you could get up to £1,000 taken off your bill. But watch out: despite occupying high-street properties, you’re probably not eligible if your business is based on professional services or advice, such as a solicitor’s office.
For more information, please go to the gov.uk website.
Are there any businesses that don’t have to pay it at all?
Yes, but only a few. Buildings used for agricultural purposes, those registered for religious worship, or those used to train disabled people are usually exempt from paying business rates. You also might not need to pay if the building becomes empty. Most businesses won’t have to pay for the first three months that they have empty premises. However, after three months, you’ll likely have to pay the bills for an unoccupied property – both the business energy and the business rates.