Updated Sep 8, 2024 Business rates are a local tax that businesses pay on their property in the United Kingdom. It is a form of non-domestic rates, calculated based on the rental value of the property that a business occupies. This tax is charged on most business properties such as shops, offices, pubs, warehouses, and factories. The revenue generated from business rates is used to fund local services. The calculation of business rates is based on the property’s “rateable value”, which is its open market rental value on a specific date set by the Valuation Office Agency (VOA). The rateable value is then multiplied by a “multiplier”, which is set annually by the government. The multiplier represents the number of pence per pound of the rateable value that the business will pay in rates. There are two types of multipliers: the standard multiplier and the small business multiplier, the latter generally being lower to support small businesses. Consider a small bookstore located in a town center with a rateable value of £15,000. Assuming the small business multiplier for the year is 49.9 pence per pound, the annual business rates payable would be calculated as follows: £15,000 (rateable value) * 0.499 (multiplier) = £7,485 per annum. Various reliefs and exemptions are available to reduce the business rates payable. Some common examples include small business rate relief, rural rate relief, and charitable rate relief. Eligibility for these reliefs often depends on the type of business, the size of the property, and its usage. Business rates are a significant expense for many companies, especially those with high-value properties in prime locations. They impact the financial health of businesses and can influence decisions on property investment, expansion, and location. Due to their contribution to local government funding, business rates play a crucial role in the provision of local services. Yes, a business can challenge its rateable value if it believes it is incorrect, such as if there have been significant changes to the property or its surroundings. This process is known as “checking and challenging” and must be done through the Valuation Office Agency. Properties are typically revalued every five years to reflect changes in the property market. This revaluation ensures that business rates bills are based on more current market values. Most businesses operating from commercial properties are liable for business rates. However, certain properties are exempt, such as agricultural land and buildings, and some premises used for the welfare of disabled people. Additionally, businesses operating from home may not need to pay business rates depending on the scale and nature of the work carried out. Failure to pay business rates can lead to serious consequences, including legal action. Local authorities may take steps to recover unpaid rates, which can include charging interest on overdue amounts and eventually taking court action to secure payment. It’s essential for businesses facing difficulty in paying their rates to contact their local council as soon as possible to discuss available options. Business rates represent a key financial consideration for businesses in the UK, directly influencing operational cost structures and investment decisions. Understanding how they are calculated, the reliefs available, and the impacts of non-payment is crucial for effective business management and planning. Definition of Business Rates
How Business Rates Are Calculated
Example
Reliefs and Exemptions
Why Business Rates Matter
Frequently Asked Questions (FAQ)
Can a business challenge its rateable value?
How often are properties revalued for business rates purposes?
Do all businesses need to pay business rates?
What happens if a business fails to pay its business rates?
Economics