Business rates are a reality for millions of companies across the UK and as you plan your months and years ahead, knowing how to estimate business rates could be beneficial in helping you forecast your cash flow. But who pays business rates and what relief might you be entitled to? We’ll cover all that and more in this guide.
What are business rates?
Business rates are a form of tax on commercial properties; the revenue from which is used to fund local government . If you operate your business from a premises, meaning a shop, office, factory or warehouse, for example, you’ll be charged business rates by your local council. You’re also likely to pay full business rates on a property that you partially occupy for business purposes, though your local council has the discretion to award business rates relief.
How business rates are calculated
Business rates are usually reviewed every five years by the Valuation Office Agency (VOA), which tweaks the ‘rateable value’ – the market rental value of a premises at the time of the valuation . The last business rates revaluation came into effect in 2017 (based on rateable values from 2015) but following the COVID-19 pandemic, the government delayed the next revaluation; the updated business rates will take effect from April 2023, based on the rateable values of April 2021 .
How to estimate your business rates
You can estimate your business rates by following the steps below.
- Check the rateable value of your business premises
- Use the relevant ‘multiplier’ (a set rate) and multiply it by your rateable value. GOV.UK has a useful table that will help you identify your set rate based on the latest figures.
- Deduct any business rate relief that you’re eligible for – more on that later.
Business rates are applied differently across the UK – the steps described above are relevant to England and Wales, but you can read more about how rates are collected in Scotland and Northern Ireland.
How to pay business rates
Your local council will send you a business rates bill in February or March each year. Practically speaking, you can usually pay your business rates by setting up a Direct Debit with the local council, or pay in instalments, or through an online transfer. You can find contact information for your local council on GOV.UK.
Business rate exemptions
You can claim for a business rates exemption if you operate your company from one of the following building types:
- Agricultural buildings and land, including fish farms
- Buildings that support disabled people with training or their welfare
- Church halls and businesses registered for public worship
Additionally, you may be entitled to business rates relief if you operate from an empty building for a period. For example:
- You are exempt from business rates if your premises lies empty for three months, after which you pay the full rate
- Warehouses and other industrial buildings are exempt for an additional three months
- Listed buildings carry no business rates charge until they are reoccupied
- Charity-owned properties will not be charged business rates while empty, on the proviso that your activity as the next occupier is mostly for charitable purposes
- Likewise, buildings used mostly as community sports clubs carry no business rate charge while empty.
How to apply for business rates relief
If you’re based in England and you wish to make a claim for business rate exemption and relief, you can use the VOA online service to report that you think your premises should be rate-free. There is a separate process for appealing business rates in Wales, and in Scotland there are local assessors who you can contact.
Beyond business rates
Tyl Talks is positively bursting with articles to help you on your journey as a business owner. Read some of our latest guides below.
This has been prepared by Tyl by NatWest for informational purposes only and should not be treated as advice or a recommendation. There may be other considerations relevant to you and your business so you should undertake your own independent research.
Tyl by NatWest makes no representation, warranty, undertaking or assurance (express or implied) with respect to the adequacy, accuracy, completeness, or reasonableness of the information provided.
Tyl by NatWest accepts no liability for any direct, indirect, or consequential losses (in contract, tort or otherwise) arising from the use of the information contained herein. However, this shall not restrict, exclude, or limit any duty or liability to any person under any applicable laws or regulations of any jurisdiction which may not be lawfully disclaimed.