No matter if you trade from a commercial property or work from home, you need to be aware of business rates.
From what it is, to how to know how much to pay and relief schemes. Read to learn everything you need to know about business rates.
What are business rates?
Business rates, also known as non-domestic rates, are a tax paid on business properties. It works very similar to council tax. It’s an annual bill issued on the 1st of April for the year ahead. It can be paid in full or by monthly instalments. The money collected contributes to the cost of services, such as police, education and housing provided by local authorities.
How are business rates calculated?
When it comes to working out how much you’ll have to pay, the first step is to identify the property’s rateable value. The rateable value is based on a property’s estimated value on the open market. This is managed by Valuation Office Agency (VOA)
Revaluation usually happens every five years with the next one in 2023. The VOA is currently contacting businesses for the rental information, so if you need to look out for a letter.
Once you know your rateable value, you need to multiply it by a relevant multiplier. In England and Wales, from 2021 to 2022, the multiplier for standard businesses with a rateable value of £51,000 is 51.2p, and for small businesses – 49.9p.
For example, if you run a small business with a rateable value of £14,000, you need to multiply this amount by 49.9p.
This is your basic business rates: £14,000 x £0.499 = £6986
As this rateable value is less than £15,000, you can also apply for small business relief and reduce your bill. More about business rate relief schemes below.
Business rates when working from home
You may need to pay business rates even if you run your company from home. This will only apply if you use part of your home exclusively for business.
For example, if you use your bedroom as your office, you won’t be billed. However, if part of your property is used exclusively for business-related purposes and you have customers or staff coming in, you will have to pay. To find out whether you need to pay, you need to contact the VOA.
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Business rates relief schemes
Some businesses may qualify for discounts from the local council and can apply for business rates relief schemes. Here are a few:
Small business rate relief
If your property’s rateable value is less than £12,000 you won’t have to pay business rates at all. If it’s between £12,001 and £15,000, the rate of relief will gradually go from 100% to 0%.
For example, if your property’s rateable value is £13,500, you’ll get a 50% discount and if it’s £14,000, you’ll get a 33% off your bill.
Rural rate relief
If you run your business in a rural area with no more than 3,000 residents and you’re the only shop with a rateable value of up to £8,500 or the only public house or petrol station with a rateable value of up to £12,500, you can apply a rural rate relief.
Charitable rate relief
Charities and community amateur sports clubs can apply for charitable rate relief of up to 80%. To check if you’re eligible, contact your local council.
If you start a business in an enterprise zone or decide to move into one, you can be eligible for business rates relief. You can find your local enterprise zones here and check whether they offer business rates reliefs and, if so, when and how to apply.
If your business is a restaurant, shop, cinema or music venue or any other hospitality or leisure such as gym, casino or hotel, you may be able to apply for a retail discount. The retail discount reduces a bill by a third and you can get it on top of any other relief schemes you are eligible for.