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Understanding UK Business Rates: A Comprehensive Guide

Business rates are taxes charged on most non-domestic properties. They provide essential revenue to local authorities to fund vital services. If you operate business premises — even working from home in some cases — you need to be aware of these rates.

Understanding how business rates are calculated and paid and the various relief schemes available is crucial for business owners to manage their finances effectively and comply with legal requirements.

How Much Are Business Rates?

Business rates (sometimes called commercial or non-domestic rates) are taxes levied on most non-domestic properties in the UK. These include commercial properties such as shops, offices, warehouses and factories. The rates are based on the property's rateable value assessed by the Valuation Office Agency (VOA). The rateable value is an estimate of the annual rent the property could fetch on the open market as of a specific date. This valuation is used to calculate the business rates bill for each property.1 Business rates are payable by the occupier or owner, depending on the lease terms.

You’ll need to establish your property's rateable value to estimate your business rates bill.2 Once you have this information, you can identify the appropriate multiplier. Next, you can apply any eligible reliefs to calculate your final bill using the government’s business rates calculator.3

2024-25 Business Rates

In the 2023 Autumn Statement, the Chancellor announced a package of support worth £4.3 billion over the next five years to support small businesses. These measures include, from 1st April 2024:4

  • The small business multiplier will be frozen at 49.9p.
  • The standard multiplier will be uprated in April by September’s CPI figure (6.7%), increasing the multiplier from 51.2p to 54.6p.
  • The 2024/25 Retail, Hospitality and Leisure (RHL) scheme will be extended for a fifth year into 2024-25, retaining the existing scope and providing eligible properties with 75% relief, up to a cap of £110,000 per business.

Business Rates Relief

Business rate relief schemes are available to provide financial assistance to eligible businesses. Small business rate relief is one such scheme offering reduced rates or complete exemptions for properties with a low rateable value. You can get small business rate relief if:

  • Your property’s rateable value is less than £15,000.
  • Your business only uses one property - you may still be able to get relief if you use more.

A lower multiplier is applied to the rateable value to determine the final amount payable. This measure aims to support small businesses by reducing their tax burden and promoting economic growth. Contact your local council to:5

  • Check if you’re eligible.
  • Find out how to get small business rate relief.
  • Check if you can get any other types of business rates relief on top of small business rate relief.

Other relief schemes, such as rural rate relief or charitable rate relief, may apply to specific types of businesses or properties.6

Business Rates Bill

The local council issues the business rates bill annually and outlines the amount due for the forthcoming financial year. It includes:

  • Details of the rateable value.
  • Applicable multiplier.
  • Any relief or exemptions.
  • The total amount payable. 

As a business owner, you’re responsible for ensuring timely payment of your rates to avoid penalties.

Local Council

Local councils are responsible for collecting business rates. They use the revenue from business rates to fund local services such as road maintenance, waste management, and community facilities. Councils also have the authority to grant relief and exemptions to businesses facing financial hardship or operating in specific sectors.

Paying Business Rates

Business rates can be paid by direct debit, online payment, or a payment plan arranged with the local council. As a business owner, you must keep track of payment deadlines and budget accordingly to avoid financial penalties or legal action.

Council Tax

Council tax is a separate tax levied on domestic properties in the UK to fund local services provided by the council. Unlike business rates, council tax is payable by the occupants of the property rather than the property owner. The amount of council tax payable is determined by the property's valuation band and the local council's tax rate.

Holiday Rental Homes

Holiday rental homes are subject to business rates if available for commercial letting for 140 days or more per year. The rates are based on the property's rateable value and payable by the owner. However, certain exemptions or relief schemes may apply depending on the specific circumstances of the property.

Conclusion

Business rates are a significant financial consideration for businesses operating in non-domestic properties. Understanding how business rates are calculated and paid and the various relief schemes available is essential if you want to manage your finances effectively and comply with legal requirements.

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