Business rates can become a nightmare for many new and small businesses. Navigating these rates can be stressful for companies with business properties. This guide is to help you get the basics of business rates, including what they are and how to calculate them.
What Are Business Rates?
If you own a business property, then you will pay business rates. They are taxes for the premises.
What Types of Businesses Have Business Rates?
Most non-domestic properties will more than likely have business rates. Even if one part of a building is used for non-domestic purposes, there will be a charge of business rate. Below are a list of the main businesses that pay business rates.
|Non-Domestic Property||Business Rate?|
|Holiday Rental Homes||✓|
How To Calculate Business Rates
When calculating the estimated business rates for your business, you take the rateable value of your business, then multiply that by the government’s up-to-date ‘multiplier’.
What is The Rateable Value?
The rateable value is determined by the Valuation Office Agency (VOA) and it is the value that is assigned to a non-domestic premise. This is based on various factors, such as:
- Property size.
- Property usage.
- Annual market rent.
Every five years, the Valuation Office Agency will review the figures from their valuation with properties. They usually valued at different levels.
If you want to find the rateable value for your business premises, use this link to get more information.
What Is A Multiplier?
A multiplier is also known as the poundage rate. This is the number of pence-per-pound of rateable value you’re required to pay via the business rate. Each year the government will review the multipliers and adjust them based on inflation rates.
To find more information about current business rates multipliers, use this link.
What Is the 2020/21 Business Rates Multiplier?
Below is a table showing a short history of the multipliers in England.
|Year||Standard multiplier||Small business multiplier|
|2020 to 2021||51.2p||49.9p|
|2019 to 2020||50.4p||49.1p|
|2018 to 2019||49.3p||48.0p|
|2017 to 2018||47.9p||46.6p|
|2016 to 2017||49.7p||48.4p|
Firstly, once you have your rateable value, find out which multiplier you need to use for your calculation. For businesses with a rateable value of £51,000 or more, use the standard multiplier. If your rateable value is under £51,000, then use the small business multiplier.
Next, multiply the rateable value by your selected multiplier. This gives you the amount you have to pay in business rates. Remember to note, this figure is before any relief is deducted. More information about reliefs is stated further down this article.
49.9p is the business rate multiplier in 2020/2021 for small businesses based in England.
£5,000 is the example rateable value of our small business premises.
49.9p x £5,000 = £2,495 is our example estimated business rate for 2020/2021.
By following this link, you can use the government’s business rates calculator.
If you’d like further guidance with business rates, the government states that you can contact qualified surveyors. On the government website, they show the Royal Institution of Chartered Surveyors (RICS), the Institute of Revenues, Rating and Valuation (IRRV) and the Rating Surveyors Association as recognised companies.
It is important to note that business rates are calculated differently in both Scotland and Northern Ireland. For more information about the Scottish government’s business rates calculator, use this link. If you’d like more information about the business rates in Northern Ireland, use this link.
What Is The Small Business Rate Relief?
Some properties may be eligible for reliefs that can help with paying business rates. One of the most common and popular for smaller companies is the small business rate relief. This relief applies if your property has a rateable value of less than £15,000 and if your business uses just one property.
There is also full relief available to business properties that have a rateable value of £12,000 or less. For businesses with rateable values between £12,001 and £15,000, relief will gradually decrease from 100 per cent to zero per cent.
For businesses that don’t qualify for the small business rate relief and have a rateable value below £51,000, they will still have their bills calculated using the lower small business multiplier.
Some other business rates reliefs are available. These include the charitable rate relief and rural rate relief. More information about these reliefs can be found on the government website.
What If Your Business Rates Are Wrong?
Firstly, you should check that the Valuation Office Agency’s rateable value is correct for your property. It is a good idea to compare your rateable value with other properties that are similar to yours in your area. If after this, you still believe your rateable value is wrong, then you can apply to have it changed.
The government has an online tool for helping you check your rateable value and then applying to have it changed.
What If I Am Working From Home?
If you use a small part of your home for business purposes, then you usually wouldn’t have to pay business rates. However, one top of your council tax, there are some circumstances where you will have to pay business rates, such as:
- If you sell things to people who visit your property.
- If your property is split into both domestic and business parts. An example is a flat above a shop
- If you employ someone at your property.
If you’re unsure if you should be paying business rates, contacting the Valuation Office Agency is a good place to start to get more information.
What Businesses Are Exempt From Business Rates?
Some properties that are used across England are exempt from business rates. You may not have to pay business rates on the following properties:
- Businesses with agricultural buildings and land. This includes fish farms.
- Buildings used for training.
- Buildings for the welfare of disabled people.
- Buildings that are registered for public religious worship or church halls.
However, in the case of these businesses, there are strict legal requirements for these exemptions.
Do I Need To Pay Business Rates For An Empty Property?
For 3 months, you do not have to pay business rates for empty properties. Once the 3 months have expired, the majority of businesses are required to pay the full business rate.
Some properties may receive an extended empty property relief. These include:
- Industrial premises such as warehouses. They are exempt for a further 3 months.
- Listed buildings are exempt until they’re reoccupied.
- Buildings that have a rateable value that is under £2,900, this is until they’re reoccupied.
- Properties that are owned by charities, however, this is only if the property’s next intended use will be for charitable purposes.
- Community amateur sports clubs buildings, however, this is only if the next intended use will be as a sports club.
What If I’m Moving Into a New Business Premises?
If you are moving into a new property, you are required to contact your Regional Land & Property Services (LPS) Rating Office. Advise them of your move because you may receive a backdated rate bill. It is suggested to let them know how you’d like to pay your rate bill too.
What If I’m Moving Into a Newly Built Business Property?
Firstly, you should speak to your local LPS Valuation office to avoid a backdated bill. They will send out a valuer who will assess your new property, checking factors such as your property usage, your property size and annual market rent.
You can easily apply online to have your new property valuation assessed. Another option is to download the LPS application form (CR3) to have your property valued. This application form can be completed on your computer or smartphone screen, then sent to LPS.
Also, you could save the document to your desktop. Then, in your own time complete the form, then send it to your local LPS Valuation office as an attachment.
What If My Premises Have Been Affected By Local Disruption?
There may be an opportunity to receive a temporary reduction if your premises has been affected. Your current business rates could be reduced for disruptions such as flooding, roadworks or building work etc.
What About Business Rates During Covid?
For the 2020 to 2021 tax year, businesses in numerous sectors in England do not have to pay business rates. There is no need to take further action as your local council will automatically apply the discount. This applies to England only, however, Scotland, Wales and Northern Ireland have introduced similar schemes too.
Eligible properties for the business rate holiday include:
- Restaurants, cafés, bars or pubs.
- Cinemas or live music venues.
- Assembly or leisure properties – examples: sports clubs, gyms or spas.
- Hospitality properties – examples: hotels, guest houses or self-catering accommodations.
There have been announcements that the business rate holiday may apply to private childcare providers during the 2020-2021 rate year.
Further to these business rate holidays, there have been grants of £25,000 for businesses with a rateable value between £15,000 and £51,000.
There is grant funding of £10,000 for all businesses in any sector who already receive a rural rate or small business relief. Local authorities will contact these businesses with guidance for applications to these grants.
What happens If I Don’t Pay My Business Rates On Time?
Firstly, if you’re having troubles paying your business rates, you should call your local council.
Business rates are administered by local councils. They implement various measures for companies that cannot pay their business rates on time. Usually, the procedure is as follows:
If you are unable to pay your business rates within 7 days, your right to pay by instalments is lost. This means you will have to pay the remaining business rates in full. If the balance is still outstanding, most councils will apply for a summons to be issued against you.
You will now begin to incur additional costs with any court fees being added to the amount you owe. Once the hearing date comes and there is no payment being made, an application for a liability order will be sent.
After the liability order is issued, councils can use additional powers to collect any outstanding debt, such as bailiffs. These bailiff fees will also be added.
If the resulting bailiff action is unsuccessful, the council will then begin insolvency proceedings against your company.
How Often Do I Pay Business Rates?
You can choose to pay business rates through monthly instalments, quarterly, half-yearly or annually. The payment of business rate bills is normally set on a 10-monthly cycle. However, you can spread the payments over a 12 months cycle.