What are Business Rates?

Business rates are a tax on properties that are used for business and not residential purposes. To pay business rates a property has to be used for non domestic purposes with domestic properties qualifying for council tax instead.

Most non domestic properties will be charged business rates including:

• Offices
• Shops
• Warehouses
• Factories
• Public houses

Business rates are also known as national non domestic rates and can also be applicable on properties where only part of the building is used for non domestic reasons.

How are business rates calculated?

Business rates are worked out by using the rateable value of your property and either a small business or standard multiplier.

The valuation office agency (VOA) calculate a rateable value by estimating the rental value of a property on the open market.

A multiplier comes in two forms either a standard or small business. The value of the standard multiplier is currently 51.2p and the small business multiplier is 49.9p.

The correct multiplier for your property depends on the rateable value given by the VOA which can be changed.

The standard multiplier should be used if your rateable value is £51,000 (51.2p) or more. Use the small business multiplier (49.9p) if your rateable value is below £51,000.

The VOA give their rateable valuation to your local council so they can charge you the appropriate national non domestic rate for your property.

Can I estimate my business rates?

It’s possible to estimate your business rates by multiplying your property’s rateable value by the appropriate multiplier.

Business rates calculation example

Rateable value of £11,000 x 49.9 pence (small business multiplier) = £5489 business rates.

In this example because the business rates are calculated at under £12,000 small business rates relief can be applied meaning no business rates are payable.

How do I check my business rates valuation?

The government have an online tool that allows you to find a national non domestic rate valuation. The service let’s you find the current rateable value of a business property in England or Wales.

The business rates valuation checker also let’s you check:

• how the rateable value was calculated
• the rateable value of similar properties
• get an estimate of your business rates bills

Small business rates relief scheme

The small business rates relief is very helpful for small businesses and is available if your property has a rateable value of less than £15,000.

To qualify for full business rates relief:

Your property has a rateable value of £12,000 or less.

Your business only uses one property. In some cases you may be able to receive some relief if more than one property is used.

Property with a valuation of between £12,001 and £15,000

A property with a rateable value of between £12,001 and £15,000 will receive relief at a rate that reduces gradually from 100% to 0%.

If your business uses more than one property

In cases where your business starts using a second property you will be entitled to relief on your existing property for twelve months.

Small business rate relief is still possible after twelve months if:

• none of your other properties have a rateable value above £2,899.
• the total rateable value of all your properties is less than £20,000 (£28,000 in London).

Business rates relief schemes

Apart from small business rates relief other business rates relief options are available. These include:

• rural rate relief
• charitable rate relief
• enterprise zone relief
• hardship relief
• retail, hospitality and leisure relief
• local newspaper relief

You need contact your local council to find out more about eligibility criteria and how to apply for whichever business rates relief you are entitled to.

Is my building exempt from business rates?

Some properties are exempt from paying business rates. There are very strict legal requirements that permit a non domestic property an exemption from business rates.

The most common exemptions from business rates are:

• Agricultural building and land
• Property used for the welfare and or training of disabled people
• Church halls or property registered for public religious worship

Business rates working from home

Business rates are not normally applicable if you use a room in your house as an office. If you use your own home in a more significant way you may have to pay business rates and council tax as well.

Examples of when business rates may be applicable are:

• Your house is split into domestic and business parts.
• you have employees who work at your property.
• As part of your business you sell services or goods to people who visit your property.
• You have converted part of your property for business purposes.

The VOA can be contacted to answer any questions on whether you should be paying business rates whilst working from your own property.

Tax relief is available if you are employed under PAYE and have to contractually use your own home for work purposes.

Empty building business rates exemption

Business rates exemption is available on empty buildings for three months. After three months normal business rates will be applicable in most cases.

An extended empty property relief is available to:

• listed buildings.
• buildings with a rateable value under £2,900.
• properties owned by charities .
• community amateur sports clubs buildings.
• industrial premises like a warehouse can get a further 3 months exemption.

If your property becomes vacant you should let your local council know.

Can business rates be classed as an expense?

Business rates can be included as an allowable expense in your accounts. As a tax deductible business expense your business rates can reduce your taxable profit before calculating any tax due to HMRC.

How do I pay my business rates?

Business rates are payable to your local council and they will arrange for you to pay what you owe usually by direct debit.

If you have any questions about how to pay your business rates (non domestic rates) you should contact the business rates department of your local council.