If you run a new small business, or are thinking about starting one, then business rates are something you would have come across. In the UK, business rates are a property tax charged annually on all non-domestic properties, set and managed by the Valuation Office Agency (VOA).
UK business rates are calculated by taking a business’s rateable value and multiplying it by the relevant multiplier, set by the VOA (read more detail on calculating business rates).
But this guide’s here to help. Below, we explain the purpose of business rates, how to calculate your rates based on your business’s rateable value, and how business rates have to be paid.
What are business rates in the UK?
Put simply, business rates are a property tax for businesses. These have to be paid by all non-domestic properties, which includes shops, restaurants, pubs, offices, warehouses, factories, and so on.
So if you reside in the UK and start a brick and mortar business, small or large, you’ll be required to pay business tax. The money you pay will go to your local council, funding both local public services and the UK Government, as a whole.
The Valuation Office Agency (VOA) decides and sets the business rates in England. Usually these are reviewed every five years, but this is set to change to every three years in England starting from 2023. Due to this, it’s worth noting that business rates are not the same across the UK.
Business rates are charged differently in England, Wales, Scotland, and Wales, and can also differ to reflect location and the current property market.
What is my business’s rateable value?
Finding out the rateable value of your business is important, as it’s the first step to calculating the business rates you’ll have to pay each year.
Thankfully, it’s quite simple. The GOV UK website has a free service that you can use to find the rateable value of your business, which will be a number (a price) determining, you guessed it, your business’s overall value.
With this, you’ll know whether your business will be charged using the Standard Multiplier or the Small Business Multiplier.
Small businesses get charged less, needless to say, as it’s, well, only fair.
But to give you a quick idea, businesses valued at £51,000 or more will be charged using the Standard Multiplier while businesses valued under £51,000 will be charged using the Small Business Multiplier.
How to calculate business rates
After finding out the rateable value of your business (explained in the above section), calculating your business rates is as simple as heading to the GOV UK website to view the rates for any relevant year. Read more in our article on how to calculate your business rates.
What you’ll then need to do is multiply your business’s rateable value by the relevant rate – going by year and whether your business is required to pay the Standard Multiplier or the Small Business Multiplier.
And that’s it.
If your business is entitled to any business rates relief (discounts provided by your local council), you’ll want to deduct these from your total calculation.
Not sure if your business is entitled? There are different types of business rates relief that your business might be eligible for, so it’s worth checking the GOV UK website to find out.
Just some of these include small business rate relief, rural rate relief, hardship relief, and retail, hospitality, and leisure relief.
When are business rates paid?
So you’ve calculated your business rates, but when do you have to pay them?
Bills for business rates get sent in February or March each year. Fortunately, this is the same for all businesses, applying to the following tax year.
Once you have been sent your business rates bill from your local council, it’s a matter of paying it off in monthly instalments, two half yearly instalments, or one lump sum.
How your local council’s business rates are normally paid as well as the flexibility you’re given with your payments will depend on your local council, so make sure to check your local council’s website to get a better idea.
Can business rates change?
Your business rates can change due to significant business changes or premises changes.
In the event this happens, you’ll need to report any changes to the Valuation Office Agency (VOA), so it’s worth knowing about as it can mean a reduction to your business rates.
This can include:
- relocating your business or changes made to your premises
- changing the nature of your business
- subletting part of your property
- merging two or more of your businesses into one
Temporary reductions in your business rates can also occur if your location is affected by any kind of disruption that’s out of your control.
Again, you’ll want to report it to the Valuation Office Agency if a temporary reduction hasn’t already been given.
Are business rates the same across the UK?
While the Valuation Office Agency sets the business rates in England, how rates are charged differs in Wales, Scotland, and Northern Ireland.
These are individually set by the Welsh Government, Scottish Government, and Northern Ireland Executive.
It should go without saying that you’ll only need to worry about the business rates that apply to the country your business is based in, as well as the local council that will be issuing your annual business rates bill.
This is something that’s simply worth knowing, however, if your business changes countries in the UK or plans to operate in two or more countries in the UK.
And that wraps our simple guide on how to calculate business rates in the UK.
If you’re a new business owner, calculating your business rates can seem confusing at first.
But, ultimately, it boils down to finding out your business’s rateable value and multiplying it by the multiplier that applies to your business, based on year and whether the rateable value of your business requires you to pay the standard rate or the small business rate.
Thankfully, all of this can be done on the GOV UK website.