Business rates: All you need to know

If you’re a business owner in the UK, then – of all the possible expenses and overheads – you’re probably most familiar with business rates (a tax on the right to occupy a commercial property for those who aren’t).

With the potential to equal as much as 50% of your yearly rent, business rates can easily become a significant overhead, and many UK businesses find themselves struggling under the burden.

Most business owners will find that they need to pay rates in some shape or form, but there are exceptions that exist and ways to reduce the amount you pay. We’ll cover all of that in this blog.

Who must pay business rates?

You’ll have to pay rates if your business occupies a non-domestic or commercial property in the UK. The person responsible for the rates is the property occupier or leaseholder.

Where half a property is used for residential purposes and the other half for commercial, business rates must still be paid for the commercial half; shops with flats above them for example.

Working from home? Business rates may still apply to the area in your home that you use for work (study, home office etc).

As we said before, there are some exceptions, but we’ll get into those later.

When are business rates paid?

You normally receive a business rates bill in February or March each year, for the following tax year. As rates bills can be for a substantial amount, government regulations allow you to pay in 10 monthly installments.

You can estimate how much your rates bill will be in advance by using multipliers and rateable value.

How to get an accurate estimate of your business rates

Calculating your business rates is always worth it, just to make sure you’re paying the correct amount. 1 in 3 rates bills are incorrect, that’s how easy it is to overpay! Here’s how to estimate:

  1. Find your property’s rateable value (RV) by entering your postcode in the VOA’s search option.
  2. Check the table to find the correct multiplier. Use the standard multiplier if your rateable value is £51,000 or more. Use the small business multiplier if your rateable value is below £51,000.
  3. Once you have the correct amounts, you multiply your rateable value by the multiplier to get the estimate for your business rates.

Paying business rates

Paying your rates bill is straightforward. You’ll receive your bill sometime around March, and most businesses will be asked to pay in equal monthly instalments (on or before the first of the month).

Tip: Always make sure your business details are up to date with the council – if you move locations or start a new business then keep them informed. If not, you could be charged the wrong amount.

If you are finding it difficult to pay your rates bills due to cash flow, you can also speak to your local authority, and they may be able to change amounts and dates in relation to your business rates.

If you fail to pay your business rates you could receive a Summons to appear in Magistrates Court – and this is just a starting point. Things can escalate quickly from here. It’s best to be upfront with your local authority about any struggles you are having.

What businesses don’t have to pay business rates?

There are several building types exempt from paying business rates. These include:

  • Farmland and buildings, but not including buildings that are used as offices, etc.
  • Fish farms
  • Buildings that are exclusively used for the welfare of training and disabled people
  • Any place that is used for public religious worship

What businesses can get business rate relief?

Business rate relief is available across a wide number of programmes that aim to reduce business rates for certain business owners.

Due to the COVID-19 pandemic, a type of business rate relief is offered to UK businesses who have been particularly suffering in the fallout. Businesses that fall into the hospitality, leisure or retail industries can benefit from a 66% discount on business rates up until March 2022. It’s expected that further relief will be made available beyond this date.

Charitable businesses are aided in their work and in some cases may receive up to 100% of business rates relief. Registered charities automatically receive up to 80% relief, further discounts are available for application.

To find out more about the many types of rate relief available for businesses, speak to our experts. We’ll never charge you for advice – our overall aim is to help you pay less on your business rates.

Do empty commercial properties have to pay business rates?

Unoccupied commercial properties benefit from an initial three-month exemption. When the property is a warehouse or industrial property, the rates exemption is extended to six months. When the grace period is over, the property is liable for business rates as usual.

If you’re struggling under the burden of empty property rates, we can help.

Knowledge of business rates, and the ability to estimate them, is an important and necessary understanding for business owners to have. We’ve covered the need-to-know basics for you here – but if you still have questions when it comes to business rates then it’s best to speak to the experts.

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