If you own or rent a commercial property in the UK, understanding how to calculate business rates is essential. Business rates are a type of tax charged on non-domestic properties and are crucial for budgeting and planning. In this comprehensive guide, we’ll break down everything you need to know from rateable values to multipliers and exemptions using real-world examples.
Additionally, we’ll explore tips to reduce your bill, provide a helpful checklist, and address frequently asked questions. By the end, you’ll have a clear understanding of how business rates work and what steps you can take to manage them effectively.
What Are Business Rates?
Business rates are local taxes paid by businesses on their premises. These include shops, offices, pubs, warehouses, and factories. Local councils assess and collect these taxes, which are based on the rateable value of the property. Essentially, business rates are a way for companies to contribute to local services like street cleaning, fire services, and education.
How Are Business Rates Calculated?
Business rates are calculated using this straightforward formula:
Rateable Value × Multiplier = Business Rates Payable
This calculation involves two key elements: the rateable value and the multiplier. Let’s explore both below.
1. Find Your Rateable Value
The rateable value is set by the Valuation Office Agency (VOA). It reflects the estimated annual rental value of your property on a specific date, usually based on open market conditions. You can easily check your property’s rateable value on the official government website.
Example: If your shop’s rateable value is £25,000, this figure will be used in your calculation.
Moreover, the VOA considers factors like property size, location, and usage type when determining the rateable value. Therefore, it’s important to ensure the details are correct.
2. Apply the Business Rates Multiplier
Next, you apply the appropriate multiplier. The government sets these values annually. Typically, there are two kinds of multipliers:
- Standard multiplier: For properties with a rateable value over £51,000
- Small business multiplier: For properties with a rateable value of £51,000 or less
2025 estimated figures for England:
- Standard multiplier: 0.546
- Small business multiplier: 0.499
Example: If your shop qualifies for the small business multiplier:
£25,000 × 0.499 = £12,475 annual business rates
3. Check for Reliefs and Exemptions
Thankfully, several relief schemes can reduce the amount you owe. These include:
- Small Business Rate Relief (SBRR): Available for properties with a rateable value below £15,000
- Rural Rate Relief: For businesses in eligible rural areas
- Charitable Rate Relief: For charities and non-profit organisations
- Transitional Relief: Limits the increase of business rates after revaluation
To determine your eligibility and apply, visit the official business rate relief portal.
Business Rates Checklist
- ✅ Check your property’s rateable value on the VOA website
- ✅ Apply the correct multiplier (small business or standard)
- ✅ See if you qualify for any relief schemes
- ✅ Contact your local council if you believe the valuation is incorrect
- ✅ Plan for rate revaluations that may impact future payments
Common Questions About Business Rates
Who pays business rates?
Tenants or property owners of non-domestic buildings are responsible. Sometimes, landlords include them in lease agreements.
How often do business rates change?
Usually, every 5 years, through a formal revaluation. However, mid-cycle adjustments can occur if significant property changes are made.
Can I appeal my rateable value?
Absolutely. If you believe your rateable value is incorrect, you can challenge the VOA assessment through an official process. Ensure you have solid evidence before making a claim.
Tips to Reduce Business Rates
Reducing your business rates may be easier than you think. Consider the following:
- Split large properties: If practical, divide large properties into smaller units. This could lower the rateable value.
- Double-check VOA data: Mistakes in the official listing could inflate your valuation.
- Co-working arrangements: Sharing your space with another business might qualify you for reliefs or lower charges.
- Negotiate with your local authority: They can sometimes offer discretionary discounts.
Final Thoughts
In conclusion, understanding and calculating business rates doesn’t have to be intimidating. By breaking the process down into manageable steps, identifying the rateable value, applying the correct multiplier, and checking for reliefs, you can take control of your financial responsibilities.
Furthermore, regularly reviewing your business’s valuation and staying informed about government updates can help you avoid overpaying. Make business rates work for you, not against you.
Have more questions? Stay tuned to our blog for updates on business taxes, savings tips, and local authority regulations in the UK.