A Guide to Business Rates

What are business rates?

Business rates are a tax charged on non-domestic properties in the UK. This includes offices, shops, pubs and factories. You have to pay a business rates bill whether you own or rent any property used to run a business, much like paying council tax for living in a domestic property.

How are business rates calculated?

The Valuation Office Agency (VOA) will start by working out a property’s rateable value (or rental value). This value is then passed on to local councils who will calculate a business rates bill for a property by multiplying the rateable value by a ‘multiplier’ figure to create a final sum. For the 2018-2019 tax year, the multiplier figure is 49.3p for the standard rate and 48.0p for small businesses.

Because the rateable value is based on the rental value of the property, this means that you’ll often have to pay higher business rates for properties with high rent. But there are other factors which affect the proportion of rates you pay, such as where your business is based and how many people it employs.

If you think that your business rates bill is incorrect, you can challenge the rateable value of the property via the gov.uk website.

How can I pay my business rates bill?

You’ll receive an annual business rates bill from your local council for the next financial year, usually around March or April.

You can choose to pay your bill in monthly instalments via direct debit, via phone or at a bank. Be sure to check with your local council as the details of how you can pay may differ depending on your location.

What’s the money used for?

The money generated through business rates bills is used by your council to fund local services including waste disposal and street lighting.

Are there any exemptions to business rates?

There are a number of exemptions to business rates, such as fish farms or buildings used for religious worship. 

You also don’t need to pay business rates on buildings which have been completely empty for up to 3 months. You can learn more about business rate exemptions here. 

What is the small business rates relief?

There are several forms of relief available to help businesses foot their business rates bills, such as charitable business rate relief and rural business rate relief. One such form of relief is the small business rates relief, mentioned in the 2018 autumn budget. It states that business rates bills for smaller English retailers will be cut by a third over the next two years.

This will have an impact on English retailers with a rateable value of £51,000 or less, and means there could be an annual saving of up to £8,000 for up to 90% of all independent shops, pubs, restaurants and cafes. 

What if I work from home?

If you work from home, such from a spare bedroom or box room, or if you don’t employ others to work from your home, then you may also be exempt from paying business rates. You can browse the full guidelines regarding business rates and working from home on the gov.uk website.

What if I can’t pay my business rates bill?

If you struggle to pay your business rates bill, be sure to check you’re paying the right amount and if you’re eligible for any exemptions or relief as outlined above. 

If you still think you can’t afford to pay the bill, it’s definitely worth getting in touch with your local council as soon as possible as they may be able to help. If you ignore your bill and the letters reminding you to pay your bill, you could face larger penalties.

What about council tax?

Consider business rates as the business alternative of domestic council tax – you pay business rates to the council for any properties used to run your business, and council tax for any properties you live in.

You may, occasionally, have to pay both business rates and council tax on the same property, though this is rare and only applies to cases such as if a shop owner lives above the business.

What other taxes do SME owners need to pay?

If you run a small business, you’ll also have to pay other taxes in addition to your business rates bill. We’ve linked to handy guides for each to help you along:

• VAT
• Corporation Tax
• Income Tax for your employees
• National Insurance for your employees

How to work out business rates

You’ll receive an annual business rates bill from your local council for the next financial year, usually around March or April.

You can choose to pay your bill in monthly instalments via direct debit, via phone or at a bank. It’s worth checking with your local council, as the details of how you can pay may differ depending on your location.

Does everyone pay business rates?

All businesses that use a commercial (non-domestic) property pay rates, including shops, offices, pubs, warehouses, and factories. Your council uses the money generated through business rate bills to fund local services, including waste disposal and street lighting.

Are there any exemptions to business rates?

Several exemptions apply to business rates, such as fish farms, agriculture, and buildings used for religious worship. You also don’t need to pay business rates on buildings that have been empty for up to three months.

What is the small business rates relief?

Several forms of relief are available to help businesses with their business rate bills, such as charitable business rate relief and rural business rate relief.

What if I work from home?

If you work from home or if you don’t employ others to work from your home, then you may also be exempt from paying business rates. You can browse the full guidelines regarding these business rates on the gov.uk website.

What if I can’t pay my business rates bill?

If you struggle to pay your business rates bill, check to see if you’re paying the right amount and eligible for any exemptions or relief outlined above.

If you still think you can’t afford to pay the bill, it’s definitely worth getting in touch with your local council as soon as possible so they can help. If you ignore your bill and the letters reminding you to pay your bill, you could face larger penalties.

Are business rates more than council tax?

Consider business rates as the business alternative to domestic council tax – you pay business rates to the council for any properties used to run your business and council tax for any properties you live in.

You may occasionally have to pay both business rates and council tax on the same property, though this is rare and only applies to cases such as if a shop owner lives above the business.

What other taxes do SME owners need to pay?

If you run a small business, you’ll also have to pay other taxes besides your business rates bill. We’ve linked to handy guides for each to help you along:

• VAT

• Corporation Tax

• Income Tax for your employees

• National Insurance for your employees